Publication - Corporate report

Scottish Government consolidated accounts: annual report 2019 to 2020

Published: 17 Dec 2020

Annual report of the consolidated financial results of the Scottish Government, its Executive Agencies and the Crown Office, prepared in accordance with International Financial Reporting Standards (IFRS). The Audit Scotland report on the accounts is also linked and is unqualified.

146 page PDF

3.9 MB

146 page PDF

3.9 MB

Contents
Scottish Government consolidated accounts: annual report 2019 to 2020
Notes to the Accounts

146 page PDF

3.9 MB

Notes to the Accounts

For the Year Ended 31 March 2020

1. Statement of Accounting Policies

In accordance with the accounts direction issued by Scottish Ministers under section 19(4) of the Public Finance and Accountability (Scotland) Act 2000 these financial statements have been prepared in accordance with the 2019-20 Government Financial Reporting Manual (FReM). The accounting policies contained in the FReM apply International Financial Reporting Standards (IFRS) as adapted or interpreted for the public sector context.

The accounts are prepared using accounting policies, and, where necessary, estimation techniques, which are selected as the most appropriate for the purpose of giving a true and fair view in accordance with the principles set out in International Accounting Standard 8: Accounting Policies, Changes in Accounting Estimates and Errors. Changes in accounting policies which do not give rise to a prior year adjustment are reported in the relevant note.

The particular accounting policies adopted by the portfolios of the Scottish Government are described below. They have been applied consistently in dealing with items considered material in relation to the accounts.

1.1 Accounting Convention and basis of consolidation

These accounts have been prepared under the historical cost convention modified to account for the revaluation of property, plant and equipment (PPE), intangible assets, and, where material, financial asset investments and inventories to fair value as determined by reference to their current costs.

These accounts reflect the consolidated assets and liabilities and the results for the year of all the entities within the Scottish Government accounting consolidation boundary. The structure of the Scottish Government and further information about the entities within the consolidation boundary is provided within the introduction of the Performance Report of these accounts.

The Executive Agencies detailed within the Performance Report mentioned above are reported within the Outturn Statements of their sponsoring portfolio.

1.2 Critical accounting judgements and key sources of estimation

The preparation of these accounts requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenditure. These assessments are based on historic and other factors that are believed to be reasonable, the results of which form the basis for making judgements. The estimates and underlying assumptions are reviewed on an ongoing basis.

COVID-19 has impacted this year’s valuation processes because it has increased the uncertainty of the immediate and medium-term economic outlook.

The material uncertainty created by COVID-19 is especially relevant to the valuation of Land and Buildings, and further information is available about the estimated valuations in note 7.

Similarly the valuations of investments, in particular for the Student Loan valuations and impairments have been impacted by uncertainty, and further detail is provided in note 11.

The exit from the EU is also creating significant uncertainty, as to the impact the as yet undetermined exit scenario will have on the Scottish Government.

1.3 Property, Plant and Equipment (PPE)

Recognition

All PPE assets will be accounted for as non-current assets unless they are deemed to be held-for-sale (see note 1.3 below), and will be accounted for under IAS 16 Property, Plant and Equipment.

Scottish Ministers hold the legal title or effective control over all land and buildings shown in the accounts.

Assets classified as under construction are recognised in the statement of financial position to the extent that money has been paid or a liability has been incurred.

Capitalisation

The minimum levels for capitalisation of a property, plant or equipment asset are land and buildings £10,000 and equipment and vehicles £5,000. Information and Communications Technology (ICT) systems are capitalised where the pooled value exceeds £1,000. Substantial improvements to leasehold properties are also capitalised. Furniture, fixtures and fittings are treated as current expenditure and are not capitalised. Any assets valued below these thresholds will be treated as expenditure in the year of purchase.

Valuation

Land and buildings have been stated at open market value for existing use or, under IAS 16 as adapted for the public sector, depreciated replacement cost for specialised buildings under a rolling 5-year Programme of professional valuations and appropriate indices in intervening years. Vessels and aircraft are valued at depreciated replacement cost, and other plant and equipment assets are reported at depreciated historic cost.

Losses in value reflected in valuations are accounted for in accordance with IAS 36, Impairment of Assets as adapted by the FReM which states that impairment losses that arise from a clear consumption of economic benefit should be taken to the outturn statement. The balance on any revaluation reserve (up to the level of impairment) to which the impairment would have been charged under IAS 36 should be transferred to the general fund.

The road network is valued at depreciated replacement cost as it is deemed to be specialist in nature. The road pavement element is valued using agreed rates determined to identify the gross replacement cost of applicable types of road on the basis of new construction on a greenfield site. These rates are re-valued annually using indices to reflect current prices and are also updated when new construction costs become available as comparators to the costs previously identified for specific road types.

Structures are valued using agreed rates determined to identify the replacement cost of applicable types of structure on the basis of new construction on a greenfield site where these are available, but special structures, which tend to be one off by their nature, are valued using specific costs that are updated to current prices. Communications are valued using agreed rates determined to identify the replacement cost of applicable types of communication.

The indexation factors applied are:

  • Road Pavement and Structures
  • Communications

Baxter Index, published quarterly by the Department of Business, Innovation and Skills

Traffic Scotland provide new gross and calculated depreciated values each year

  • Land

Land indices produced by the Valuation Office Agency (VOA)

Upwards movements in value are taken to the revaluation reserve. Downward movements in value are set off against any credit balance held in the revaluation reserve until the credit is exhausted and thereafter charged to the relevant portfolio outturn statement.

The trunking or detrunkings of roads from or to local authorities is treated as a transfer from or to other government departments. Roads and structures detrunked are effectively dealt with as disposals in accounting terms at nil consideration. Any associated profit or loss is processed through the general fund.

Subsequent Cost

Subsequent costs are only included in the asset’s carrying amount or, where appropriate, recognised as a separate asset, when it is probable that future economic benefits associated with the item will flow to the Scottish Government and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the outturn statement during the financial period in which they are incurred.

1.4 Assets Held for Sale

A property is derecognised and held for sale under IFRS 5 Non-current Assets Held for Sale and Discontinued Operations when all of the following requirements are met:

  • It is available for immediate sale in its present condition;
  • A plan is in place, supported by management, and steps have been taken to actively market the asset and conclude a sale at a reasonable price in relation to its current fair value; and
  • A sale is expected to be completed within 12 months.

Assets classified as held for sale are measured at the lower of their carrying amounts immediately prior to their classification as held for sale and their fair value less costs to sell. Assets classified as held for sale are not subject to depreciation or amortisation.

1.5 Donated Assets and European Union Grants

IAS 20 Accounting for Government Grants and Disclosure of Government Assistance, and SIC10 Government Assistance apply as interpreted by the FReM. Donated assets and grants received from the European Union for capital assets are capitalised at their valuation on receipt and this value is credited as income to the outturn statement. Subsequent revaluations are accounted for in the revaluation reserve, and impairments may be charged to the outturn statement.

1.6 Intangible Assets

In accordance with the FReM, Intangible assets are accounted for in line with the requirements of IAS 38 Intangible Assets, and are valued at depreciated replacement cost. Revaluations are carried out according to IAS 38 for assets over a valuation threshold.

Future economic benefit has been used as the criteria in assessing whether an intangible asset meets the definition and recognition criteria of IAS 38 Intangible Assets for assets that do not generate income. IAS 38 defines future economic benefit as, ‘revenue from the sale of products or services, cost savings, or other benefits resulting from the use of the asset by the entity.’

Intangible assets other than assets under development are amortised on a straight line basis over their estimated useful lives. Impairment reviews are carried out if there are any indicators that impairment should be considered. Intangible assets under development are not amortised.

1.7 Depreciation and Amortisation

Land is considered to have an indefinite life and is not depreciated.

Assets under construction are not depreciated.

For all other property, plant and equipment and intangible assets, depreciation or amortisation is charged at rates calculated to write off their valuation by equal instalments over their estimated useful lives which are normally in the following ranges:

  • Dwellings and other buildings
    5 to 50 years (as per valuation)
  • Vehicles
    3 to 10 years
  • Vessels
    25 to 30 years
  • Aircraft
    5 to 20 years
  • Equipment
    3 to 15 years
  • ICT systems
    3 to 10 years
  • Internally developed software
    3 to 5 years
  • Leasehold improvements
    Over the shorter of asset life and lease term

1.8 Financial Instruments

The Scottish Government measures and presents financial instruments in accordance with IAS 32, IFRS 7, IFRS 13 and IFRS 9 as interpreted by the FReM. IFRS 9 came in to force in 2018-19, replacing IAS 39.

IFRS 9 contains three principal classification categories for financial assets:

  • amortised cost;
  • fair value through other comprehensive income (FVOCI); and
  • fair value through profit or loss (FVTPL).

The classification of financial assets under IFRS 9 is based on the business model in which a financial asset is managed and its contractual cash flow characteristics. Financial liabilities are classified and subsequently measured at amortised cost, except for:

  • Financial liabilities at fair value through profit or loss, which is applied to derivatives and other financial liabilities designated as such at initial recognition
  • Financial liabilities arising from the transfer of financial assets which did not qualify for derecognition, whereby a financial liability is recognised for the consideration received for the transfer
  • Financial guarantee contracts and loan commitments

The Scottish Government has classified its financial instruments as follows:

Financial Assets

  • Cash and cash equivalents, trade receivables, short term loans, accrued income relating to EU funding, amounts receivable and shares will be classified as amortised cost. This will also include investment funds managed by third parties which will be reported separately.
  • Student loans will be reported in the ‘At fair value through profit & loss’ category
  • Shared equity loans advanced to private individuals will be reported in the ‘At fair value through profit & loss’ category.

Financial Liabilities

  • Borrowings, trade payables, accruals, payables, bank overdrafts and financial guarantee contracts are classified as ‘Other Liabilities’.
  • Financial guarantee contracts are initially recognised at fair value. Under IFRS 9, financial guarantees are subsequently measured at the higher of the initial amount, less any subsequent amortisation where appropriate or of the credit loss allowance.

Financial instruments are initially measured at fair value with the exception of ‘Shares held in and loans advanced to public sector bodies’ which are held at historic cost, in the absence of an active market. The fair value of financial assets and liabilities is determined as follows:

  • The fair value of cash and cash equivalents and current non-interest bearing monetary financial assets and financial liabilities approximate their carrying value, and
  • The fair value of other non-current monetary financial assets and financial liabilities is based on market prices where a market exists, use of appropriate indices or has been determined by discounting expected cash flows by the current interest rate for financial assets and liabilities with similar risk profiles.

Financial instruments subsequent measurement depends on their classification:

  • Fair value through the profit and loss is held at fair value with any changes going through the outturn statement.
  • Financial assets and liabilities held at amortised cost are not revalued unless included in a fair value hedge accounting relationship. Any impairment losses go through the outturn statement.
  • Shares which are held in public sector bodies and private sector bodies that do not have a quoted market price in an active market, and where the fair value cannot be reliably measured and reported at historic cost less impairment with any impairment losses going through the outturn statement. Otherwise they are held at fair value.

Financial assets

Financial assets include shares in nationalised industries and limited companies, loans issued to public bodies not consolidated in departmental accounts; loans made under the terms of the student loans scheme, loans to private companies, repayment and deferred loans relating to housing associations and investment funds. Such investments are generally reported as non-current assets. If an investment is held on a short-term basis, or a loan is due to be repaid within one year, it will be treated as a current asset.

Impairment of Financial assets

For all financial assets measured at amortised cost or at fair value through other comprehensive income (except equity instruments designated per the irrevocable election), lease receivables and contract assets, a loss allowance is recognised representing expected credit losses on the financial instruments.

A simplified approach to impairment has been adopted, in accordance with IFRS 9, and measures the loss allowance for trade receivables, contract assets and lease receivables at an amount equal to lifetime expected credit losses. For other financial assets, the loss allowance is measured at an amount equal to lifetime expected credit losses if the credit risk on the financial instrument has increased significantly since initial recognition (stage 2), and otherwise at an amount equal to 12-month expected credit losses (stage 1).

HM Treasury has ruled that central government bodies may not recognise stage 1 or stage 2 impairments against other government departments, their executive agencies, the Bank of England, Exchequer Funds, and Exchequer Funds’ assets where repayment is ensured by primary legislation. Therefore loss allowances for stage 1 or stage 2 impairments against these bodies are not recognised.

For financial assets that have become credit impaired since initial recognition (stage 3), expected credit losses at the reporting date are measured as the difference between the asset’s gross carrying amount and the present value of the estimated future cash flows discounted at the financial asset’s original effective interest rate. Any adjustment is recognised in the Consolidated Statement of Comprehensive Net Expenditure as an impairment gain or loss.

Student Loans

Student loans are valued at fair value through profit and loss.

As there is currently no active market for student loans, the Scottish Government values the loans by using a valuation technique. This technique involves the gross value of the loans being reduced by an amount based on:

  • Interest subsidy: This is the difference between the interest paid by students (lower of RPI and Bank of England Base Rate + 1% point) and the cost of capital on loans at the rate provided by HM Treasury. The interest subsidy is estimated to meet the cost of the interest over the life of the loan and is offset by the annual interest capitalised.
  • Write off impairment: This is estimated to meet the future cost of loans that are not likely to be recovered mainly due to the death of the student, their income not reaching the income threshold, or not being able to trace the student. Each year, the future cost of bad debt is estimated based on a percentage of new loans issued during the financial year. This is offset by the actual debts written off by the Student Loan Company.

The estimates underpinning these adjustments are based on a model which holds data on the demographic and behavioural characteristics of students in order to predict their borrowing behaviour and estimate the likely repayments of student loans. Given the long term nature of both adjustments, the time value of money is significant, and they are discounted using the current HM Treasury discount rate.

There are significant uncertainties in assessing the actual likely costs and the impairment will be affected by the assumptions used.

These are formally reviewed by the Scottish Government each year and the amounts impaired reflect the Scottish Government’s current best estimate.

Further details of the movements in the loan valuation can be found in note 9, while disclosures relating to risk, required by IFRS 7, can be found in note 10.

Embedded Derivatives

Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of host contracts and the host contracts are not measured at fair value with changes in fair value recognised in profit and loss.

Financial Guarantee Contracts

Financial guarantee contract require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. They are initially recognised at fair value.

Under IFRS 9, financial guarantees are subsequently measured at the higher of the initial amount, less any subsequent amortisation where appropriate or of the credit loss allowance.

Financial Transactions

Financial Transactions are a capital funding source from HM Treasury which can only be used to fund loans and equity investments that cross the public/private sector boundary. These have to be repaid to HM Treasury in the future through adjustments to baseline funding. A repayment profile has been agreed with HM Treasury which aligns receipts by the Scottish Government with repayment to HM Treasury. This is reviewed annually.

1.9 Inventories

Items that cannot or will not be used are written down to their net realisable value. Taking into account the high turnover of NHS stocks, the use of average purchase price is deemed to represent the lower of cost and net realisable value. Work in progress is valued at the cost of the direct materials plus the conversion costs incurred to bring the goods up to their present degree of completion.

1.10 Non-Profit Distributing (NPD)/ Public Private Partnerships (PPP)/ Private Finance Initiatives (PFI)

NPD/PPP/PFI transactions are accounted for in accordance with IFRIC 12, Service Concession Arrangements which sets out how NPD/PPP/PFI transactions are to be accounted for in the private sector. The Scottish Government currently uses the Non-Profit Distributing model in structuring its service concession arrangements. Previous administrations used the Public Private Partnership and Private Finance Initiative models. As payments made and assets held relating to these models will continue to be recorded in these accounts over the foreseeable future, the accounts refer to the three different service concession models in relevant disclosure.

Assets that are assessed to be on statement of financial position will be measured as follows:

  • Where the contract is separable between the service element, the interest charge and the infrastructure asset, the asset will be measured as under IAS 17, Leases, with the service element and the interest charge recognised as incurred over the term of the concession arrangement; and
  • Where there is a unitary payment stream that includes infrastructure and service elements that cannot be separated, the various elements will be separated using estimation techniques including obtaining information from the operator or using the fair value approach.

The grantor will recognise a liability for the capital value of the contract. That liability does not include the interest charge and service elements, which are expensed annually through the relevant portfolio outturn statement.

Assets should subsequently be measured consistently with other assets in their class using IAS 16, Property, Plant and Equipment, adopting an appropriate asset revaluation approach. Liabilities will be measured using the appropriate discount rate, taking account of the reduction arising from capital payments included in the unitary payment stream.

Any revenue received by the grantor is recognised in line with IAS 18, Revenue.

1.11 Revenue

Revenue is recognised when the amount can be reliably measured, it is probable that future economic benefits will flow to the entity and when specific criteria have been met.

Operating income is income that relates directly to the operating activities of the Scottish Government. It includes fees and charges for services provided, on a full cost basis, to external customers, public repayment work and income from investments. It includes both income applied with limit as outlined by the Scottish Budget documents and income not applied. For income categorised as being applied with limit, any excess income over that approved is surrendered to the Scottish Consolidated Fund. Operating income is stated net of VAT.

Income is analysed in Note 4 between that which, under the regime, is allowed to be offset against gross administrative costs in determining the outturn against the administration cost limit (income applied), and that operating income which is not (income not applied).

1.12 Administration and Programme Expenditure

The Summary Outturn Statement is analysed between administration and Programme expenditure:

  • Administration expenditure reflects the costs of running the Core Portfolios as defined under the administration cost control regime, together with associated operating income. This does not include the costs of running other bodies within the departmental boundary: such costs are included within the appropriate category of Programme expenditure in the relevant Portfolio Outturn Statements.
  • Programme expenditure reflects non-administration costs, including payments of grants and other disbursements, including the administration costs of those bodies within the departmental boundary. Programme expenditure also takes account of income applied. A note to the accounts provides an analysis of total Programme income between income applied and income not applied (Note 4).

1.13 Grants

Grants payable or paid are recorded as expenditure in the period that the underlying event or activity giving entitlement to the grant occurs. Where necessary obligations in respect of grant schemes are recognised as liabilities.

In accordance with the Scottish Public Finance Manual, procedures are in place to ensure compliance with any conditions or provisions attached to any grant payments.

1.14 European Union Funds

Funds received from the European Union (EU), are treated as income and shown in the relevant Portfolio Outturn Statement. Expenditure in respect of grants or subsidy claims is recorded in the period that the underlying event or activity giving entitlement to the grant or subsidy claim occurs. Any related payable or receivable balances are reflected in the Statement of Financial Position.

1.15 Foreign Exchange

Under the requirements of IAS 21 The Effects of Changes in Foreign Exchange Rates and SIC 7 Introduction of the Euro, transactions which are denominated in a foreign currency are translated into sterling at the exchange rate ruling on the date of each transaction, except where rates do not fluctuate significantly, in which case an average rate for a period is used. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the outturn statement.

1.16 Leases

As directed by the FReM, IAS 17 Leases and SIC15 Operating Leases apply. Where substantially all the risks and rewards of ownership of a leased property are borne by the entity, it is recorded as a non-current asset and a corresponding payable recorded in respect of the debt due to the lessor, with the interest element of the finance lease payment charged to the outturn statement. Leases other than finance leases are treated as operating leases, and rentals payable in respect of operating leases will be charged to the outturn statement on a straight line basis over the term of the lease.

1.17 Pensions

The Scottish Government as an employer

Present and past employees are covered by the provisions of the Principal Civil Service Pension Scheme (PCSPS) which is a defined benefit scheme and is unfunded. Portfolios, agencies and other bodies covered by the PCSPS recognise the expected cost of providing pensions for their employees on a systematic and rational basis over the period during which they benefit from their services by payment to the PCSPS of amounts calculated on an accruing basis (relevant disclosures are reported in the Remuneration and Staff Report). Liability for the payment of future benefits is a charge to the PCSPS. Separate scheme statements for the PCSPS as a whole are published.

The Scottish Government as a scheme administrator

Expenditure reported within Portfolio Outturn Statements includes grant in aid to bodies sponsored by the Scottish Government, which covers pension related expenditure in respect of pension schemes operated by the sponsored body for their eligible employees. The arrangements for these pension schemes are reported and explained in the annual accounts of the relevant bodies.

NHS Bodies

The NHS Bodies in Scotland participate in the National Health Service Superannuation Scheme for Scotland which is a notional defined benefit scheme where contributions are credited to the Exchequer and the balance in the account is deemed to be invested in a portfolio of Government securities. The pension cost is assessed every five years by the Government Actuary; details of the most recent actuarial valuation can be found in the separate statement of the Scottish Public Pensions Agency (SPPA).

Additional pension liabilities arising from early retirements are not funded by the scheme except where the retirement is due to ill health. The full amount of the liability for the additional costs is charged to the outturn statement at the time the Board commits itself to the retirement, regardless of the method of payment.

1.18 Provisions

IAS 37 Provisions, Contingent Liabilities and Contingent Assets applies in full, and in these accounts provisions are made for legal or constructive obligations which are of uncertain timing or amount at the statement of financial position date on the basis of the best estimate of the expenditure required to settle the obligation. Where material, they have been discounted using the appropriate discount rate as prescribed by HM Treasury.

Student Loans

The provision is established to reflect the debt sale subsidy.

Early Departure Costs

The Scottish Government is required to meet the additional cost of benefits beyond the normal PCSPS benefits in respect of employees who retired early, prior to 2011. The Scottish Government provides in full for this cost when the early retirement Programme has been announced and is binding.

CNORIS

CNORIS is a risk transfer and financing scheme for NHS Scotland, which was first established in 1999. Its primary objective is to provide cost-effective risk pooling and claims management arrangements for Scotland’s NHS Health Boards and Special Health Boards.

NHS Boards are required to create a separate related, but distinct, provision recognising their respective shares of the total CNORIS national scheme liability. This is in addition to the recognition by NHS Boards of a provision for individual claims against their Board along with an associated debtor. The recognition of the separate provision is a technical accounting adjustment to more appropriately reflect the underlying substance of Boards’ liabilities.

On consolidation into the Scottish Government accounts, the Scottish Government’s CNORIS provision represents the national scheme liability.

NHS

In terms of accounting for the CNORIS scheme, NHS bodies provide for all claims notified to the NHS Central Legal Office (CLO) according to the value of the claim and the probability of settlement. Claims assessed as ‘Category 3’ are deemed most likely and provided for in full, those in ‘Category 2’ as 50% of the claim and those in ‘Category 1’ as nil. In conjunction with the CLO, Boards may take a different view on the appropriate level of provision for ‘Category 2’ claims, and may apply a different percentage in calculating the associated provision. The balance of the value of claims not provided for is disclosed as a contingent liability. This procedure is intended to estimate the amount considered to be the liability in respect of any claims outstanding.

1.19 Contingent Liabilities

Contingent liabilities include those required to be disclosed under IAS 37 Provisions, Contingent Liabilities and Contingent Assets and other liabilities arising from indemnities and guarantees (which are not financial guarantee contracts) included for parliamentary reporting and accountability. Portfolios must seek the prior approval of Parliament, via the Finance Committee, before entering into any specific guarantee, indemnity or letter or statement of comfort unless it arises in the normal course of business or the sum of the risk is £1m or less.

1.20 Value Added Tax (VAT)

Most of the activities of the Scottish Government are outside the scope of VAT, and in general output tax does not apply and input tax on purchases is not recoverable. Irrecoverable VAT is charged to the relevant expenditure category or included in the capitalised purchase cost of fixed assets. Where output tax is charged or input VAT is recoverable, the amounts are stated net of VAT.

1.21 Segmental Reporting

IFRS 8 Segmental Reporting requires operating segments to be identified on the basis of internal reports about components of the Scottish Government and its consolidated bodies that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segments and assess their performance. The Scottish Government reports segmental information within its outturn statements which are prepared on the basis of Ministerial portfolios.

1.22 Trade Receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less an estimate of likely impairment. Impairment of trade receivables is calculated through an expected credit loss model.

1.23 Cash and Cash Equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position. Balances are analysed between those held with the Government Banking Service and balances held in commercial banks.

1.24 Trade Payables

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

1.25 Short Term Employee Benefits

A liability and an expense is recognised for holiday days, holiday pay, bonuses and other short-term benefits when the employees render service that increases their entitlement to these benefits. As a result an accrual has been made for holidays earned but not taken.

1.26 New Accounting Standards

All new standards issued and amendments made to existing standards are reviewed by Financial Reporting and Advisory Board (FRAB) for subsequent inclusion in the FReM in force for the year in which the changes become applicable. The standards that are considered relevant to Scottish Government and the anticipated impact on the consolidated accounts are as follows:

IFRS 16 - Leases

This standard was expected to come into effect for accounting periods beginning after 1 April 2020, but in response to the disruption caused by the Covid pandemic it implementation has been postponed by a year and will now come into effect for accounting periods beginning after 1 April 2021. The impact of IFRS 16 will be to remove distinction between finance and operating leases and all assets embedded within leases will be capitalised and recorded on the Statement of Financial Position. The FReM interprets and adapts IFRS 16 for the public sector context in several ways. Information is currently being gathered to identify all right of use and leased assets not currently capitalised. The full impact has not yet been determined. These assets will be included on the statement of financial position from 1 April 2021, in accordance with the transition arrangements set out in IFRS 16 application guidance issued by HM Treasury in April 2019.

IFRS 17 - Insurance Contracts

This implementation date for IFRS 17 is not yet confirmed and the impact has not yet been determined. The Financial Reporting Advisory Board are considering implementation of the standard in the public sector.

2. Cash and cash equivalents

2019-20
£m
2018-19
£m
Government Banking Service 864 912
Commercial banks and cash in hand 106 108
At 31 March 970 1,020
2019-20
£m
2018-19
£m
At 1 April 1,020 585
Net change in cash and cash equivalent balances (50) 435
At 31 March 970 1,020
The balance at 31 March comprises: Note 2019-20
Net
£m
2018-19
Net
£m
Cash due to be paid to the Scottish Consolidated Fund 14 888 979
Consolidated Fund extra receipts received and due to be paid to the SCF 14 27 24
At 31 March 915 1,003

3. Note to the Cash Flow Statement

Adjustment to Operating Activities for Non-cash Transactions
2019-20
£m
2018-19
£m
Depreciation and Amortisation 519 488
Impairments/Write-backs 30 60
Total Capital Charges 549 548
Loss/(Profit) on disposal of property, plant and equipment (1) (9)
Loss/(Profit) on disposal of assets held for sale - 3
Change arising on revaluation of assets held for sale 1 -
Capitalised interest - financial assets (137) (76)
Student loans fair value adjustment 334 514
Investment fair value adjustments 46 118
Prior year shared equity adjustment (17) -
Income from donated asset additions (8) (6)
Auditor Fees 5 2
Unrealised exchange rate (gain)/loss - 3
Transfer of Assets - PPE (1) -
Release of finance lease liability 1 3
Other non-cash items - Health Boards 16
Other non-cash items 2 (4)
NHS Highland - movement in year in LG pension costs (10) -
NHS Board consolidation adjustments (89) 165
Total 691 1,261

4. Note to the Cash Flow Statement - Working Capital

Movement in Working Capital
Note Opening
Balance
Restated
£m
Closing
Balance
£m
2019-20
Net
Movement
£m
2018-19
Net
Movement
£m
Inventories 10 121 142
Net Decrease/(Increase) (21) (15)
Receivables and other assets
Due within one year 13 1,078 1,202 (124) 255
Due after more than one year 13 150 101 49 (46)
Assets Held for Sale 9 16 10 6 (46)
Less: Capital included in PPE (23) (21) (2) (13)
Less: Capital included in intangibles - - - -
Less: Capital included in investment (3) - (3) 3
Less: Receivable from SCF 13 - - - (141)
Less: General Fund receivable included above - (1) 1 (1)
Other Adjustment - 4 (4) (1)
NHS Greater Glasgow and Clyde adjustment - - - (1)
NHS boards consolidation adjustment 740 866 (126) 7
Total 1,958 2,161
Net Decrease/(Increase) (203) 16
Payables and other liabilities
Due within one year 14 3,974 4,024 50 587
Due after more than one year 14 3,725 3,578 (147) (48)
Less: Capital included in PPE (139) (188) (49) 32
Less: Capital included in intangibles (4) (2) 2 (3)
Less: Capital included in Investment (1) (5) (4) (3)
Less: SCF corporate payable included in above 14 (979) (888) 91 (394)
Less: Payable to SCF 14 (24) (27) (3) (24)
Less: NLF payable included in above 14 (591) (564) 27 31
Less: PFI Imputed Leases 14 (3,038) (2,936) 102 (127)
Less: Financial Guarantees included in above 14 - (1) (1) 18
Other Adjustment - (3) (3)
NHS Board Consoldiation Adjustment 1 188 187 (42)
Total 2,924 3,176
Net (Decrease)/Increase 252 27
Provisions
Due within one year 15a 220 1,165 945 41
Due after more than one year 15a 880 877 (3) 35
Less: Capital provisions 5 0 (5) -
NHS Board Consoldiation Adjustment 471 450 (21) (78)
Total 1,576 2,492
Net (Decrease)/Increase 916 (2)
Total Net Movement 944 26

5. Scottish Forestry Transfer in year

Scottish Forestry (SF) was established as an executive agency of the Scottish Government on 1st April 2019, following full devolution of forestry to the Scottish Parliament on commencement of the Forestry and Land Management (Scotland) Act 2018 (FLMSA).

As a result of the FLMSA all of the functions previously covered by Forestry Commission Scotland (FCS), an element of the Forestry Commission (regulatory, policy, support and grant giving), along with their assets and liabilities were transferred to Scottish Forestry, on the 1 April 2019.

The transfer of the assets and liabilties from FCS is treated as a Transfer by Absorption. The carrying values of the assets and liabilities of FCS as at 31 March 2019 were transferred to SF on 1 April 2019 based on the values stated in the FCS annual report and accounts for the year ended 31 March 2019. Further details of this can be found in the Scottish Forestry accounts for 2019-20.

The transfer is included within the Statement of Financial Position at 1 April 2019 and where material the balances are included in the separate notes as a "Transfer by Absoption of FCS". For ease of reference, the full impact of the Transfer by Absoption at 1 April 2019 is detailed below:

Transfer by Absorption
£'000
Non-Current Assets
Property, Plant and Equipment 133
Receivables and Other Assets due in more than one year 47
Total Non-Current Assets 180
Current Assets
Receivables and Other Current Assets 16,841
Cash and Cash Equivalents 28,446
Total Current Assets 45,287
Total Assets 45,467
Current Liabilities
Payables and Other Current Liabilities (48,676)
Provisions for Liabilities and Charges due within one year (5)
Total Current Liabilities (48,681)
Total Assets less Current Liabilities (3,214)
Taxpayers' Equity
General Fund (3,230)
Revaluation Reserve 16
Total Taxpayers' Equity (3,214)

6. Outturn Income and Expenditure

6a. Operating income analysed by classification and activity, is as follows:

Total
Income
£m
Income Not
Applied
£m
2019-20
Income
Applied
£m
Restated
2018-19
Income
Applied
£m
Health and Sport 692 - 692 599
Communities & Local Government 13 - 13 12
Finance, Economy & Fair Work 102 - 102 72
Education and Skills 160 - 160 99
Justice 17 - 17 16
Transport, Infrastructure & Connectivity 14 - 14 10
Environment, Climate Change and Land Reform 119 - 119 119
Rural Economy 632 - 632 682
Culture, Tourism and External Affairs 1 - 1 -
Social Security and Older People 2 - 2 2
Government Business and Constitutional Relations - - - -
Crown Office and Procurator Fiscal Service 5 5 - 1
Total 1,757 5 1,752 1,612

6b. Income not applied

Income not applied includes amounts for surrender to the Scottish Consolidated Fund in accordance with the Scotland Act 1998 (Designation of Receipts) Order 2009 amended by Scotland Act 2012 and Scotland Act 2016.

The major items of income not applied are: Cash received
£m
Accrued
£m
2019-20
£m
2018-19
£m
Repayment of interest - - - -
Designated receipts - Fines, forfeitures and fixed penalties - - - -
Non-designated receipts - Proceeds of Crime and other 5 - 5 4
Total Income Not Applied 5 - 5 4

6c. Interest ReceivableAll Interest receivable is external to the portfolio boundary and not from other portfolios. It is included within the Operating Outturn Statement as income applied, unless it is required to be surrendered to the Scottish Consolidated Fund.

Programme Income: Total
Income
£m
Income Not
Applied
£m
2019-20
Income
Applied
£m
2018-19
Total
Income
£m
Communities, Social Security and Equalities 3 - 3 -
Environment, Climate Change and Land Reform 105 - 105 103
Transport, Infrastructure and Connectivity 9 - 9 7
Total 117 - 117 110

6d. Interest Payable

2019-20
Total
£m
2018-19
Total
£m
Finance lease charges allocated in the year including on balance sheet PFI/PPP contracts 219 203
Other interest - 2
Total 219 205

6e. Audit Fee

The consolidated audit fee for 2019-20 is £5m (Core Portfolios £1m). Part of the audit fee, including that of the Core Portfolios, is a notional charge, as noted in Note 3a - Notes to the Cash Flow. Other entities within the consolidation boundary pay fees. The consolidated audit fee for 2018-19 was £5m (Core Portfolios £1m). There were no additional charges in relation to non audit work undertaken by Audit Scotland.

6. Outturn Income and Expenditure (continued)

6f. Operating Costs

In 2019-20 total operating costs for the Scottish Government were aligned with the portfolio budget that they support. The total operating costs for a portfolio are all the core Scottish Government staff and associated operating costs incurred by the portfolio, plus a share of the costs, such as accommodation, IT, legal services and HR, which cannot be readily attributed to a portfolio (corporate running costs). This new approach replaced the dual system of Administration and portfolio budgets both funding operating costs. This will allow greater transparency and scrutiny of operating costs, particularly over time as we continue to present operating costs in this way in future years.

Therefore, 2018-19 outturn has been restated as, with effect from 1 April 2019, there is no longer an Administration "portfolio". 2018-19 Administration expenditure previously shown as attributable to specific portfolios has been added to the relevant portfolio figures and apportioned between Core SG Level 2 figures. 2018-19 Administration expenditure previously considered as corporate services costs has been apportioned between portfolios and Core SG Level 2 figures. 2018-19 Administration capital expenditure, capital charges and Annually Managed Expenditure have been added to Finance, Economy and Fair Work figures.

Analysis of Operating Costs by Category 2019-20
£m
2018-19
£m
Staff Costs 430 365
Accomodation 37 35
Legal Costs 1 2
Travel & Subsistence 8 9
Training 4 3
IT Costs 25 22
Transport 1 1
Audit Fee 1 1
Other Office Costs 17 21
Operating Income (25) (18)
Total 499 441
Analysis of Operating Costs by Portfolio 2019-20
£m
Restated
2018-19
£m
Health and Sport 64 64
Communities and Local Government 39 24
Finance, Economy and Fair Work 87 61
Education and Skills 38 25
Justice 36 29
Transport, Infrastructure and Connectivity 10 9
Rural Economy 87 103
Environment, Climate Change and Land Reform 69 65
Culture, Tourism and External Affairs 14 9
Social Security and Older People 44 47
Government Business and Constitutional Relations 11 5
Crown Office and Procurator Fiscal Service (1) - -
Total 499 441

(1) Crown Office and Procurator Fiscal Service is fully outwith core Scottish Government and is not subject to operating costs.

6g. Analysis of Capital Charges by Portfolio

Analysis of Capital Charges by Portfolio Depreciation/
Amortisation
£m
Impairment/
Write back
£m
2019-20
Total
£m
Restated
2018-19
Total
£m
Portfolio
Health and Sport 313 30 343 360
Communities and Local Government - - - -
Finance, Economy and Fair Work 14 - 14 13
Education and Skills 5 - 5 2
Justice 39 - 39 39
Transport, Infrastructure and Connectivity 101 - 101 89
Rural Economy 37 - 37 35
Environment, Climate Change and Land Reform 6 - 6 6
Culture, Tourism and External Affairs - - - -
Social Security and Older People - - - -
Government Business and Constitutional Relations - - - -
Crown Office and Procurator Fiscal Service 4 - 4 4
Total Capital Charges 519 30 549 548

(2) Due to the implementation of operating costs, as explained in Note 6d above, the capital charges previously within the Administration portfolio are now included in the Finance, Economy and Fair Work portfolio. The prior year figures have been updated to reflect this.

7. Property, Plant and Equipment

7a. Property, Plant and Equipment

Cost or valuation Land ¹
£m
Buildings ²
£m
Dwellings
£m
Road
Network 3
£m
Transport
£m
Equipment
£m
ICT
Systems
£m
Fixtures
and fittings
Assets Under
Construction
£m
Total
£m
As at 1 April 2019 487 7,415 696 24,894 210 1,244 426 89 1,156 36,617
Prior Year Adjustments -
Additions 1 21 8 9 53 22 2 402 518
Adjustments (1) 1 (181) 2 (3) (182)
Transfers 204 480 12 38 20 2 (756) -
Transfers (to)/from Assets Classified as Held for Sale (2) (2)
Disposals (20) (2) (15) (37) (27) (2) (103)
Revaluations to Revaluation Reserve 18 35* 17 96 7 173
Revaluations to Outturn Statement - (13) (1) (1) - (1) (10) (26)
Balance at 31 March 2020 484 7,659 713 25,297 224 1,295 440 91 792 36,995
Depreciation
As at 1 April 2019 - 383 30 4,349 120 865 339 68 - 6,154
Charged in year 210 22 100 17 78 31 6 464
Adjustments (22) 2 (3) (23)
Transfers -
Transfers outwith core portfolios -
Transfers (to)/from Assets Classified as Held for Sale -
Disposal (1) (15) (36) (26) (2) (80)
Reclassifications -
Revaluations to Revaluation Reserve (198)* (16) 18 4 (192)
Revaluations to Outturn Statement (27) (27)
Balance at 31 March 2020 - 367 36 4,445 128 904 344 72 - 6,296
Net book value at 31 March 2020 484 7,292 677 20,852 96 391 96 19 792 30,699
Net book value at 31 March 2019 487 7,032 666 20,545 90 379 87 21 1,156 30,463

* Increased estimates of remaining useful asset lives is processed as a reduction to the accumulated depreciation. The revaluation of buildings in 2019-20 results in a net upward movement.

Analysis of asset financing: Road ICT
Systems
£m
Fixtures and fittings Assets Under Construction
£m
Total
£m
Land ¹
£m
Buildings ²
£m
Dwellings
£m
Network 3
£m
Transport
£m
Equipment
£m
Owned 476 4,818 587 17,868 86 375 94 17 783 25,104
Finance Leased - 42 - - 6 1 - - - 49
On balance sheet PFI 7 2,367 90 2,984 - - 1 2 - 5,451
Donated - - - - - - - - - -
EU Grant 1 65 - - 4 15 1 - 9 95
Net book value at 31 March 2020 484 7,292 677 20,852 96 391 96 19 792 30,699
Donated Asset Movement Road ICT
Systems
£m
Fixtures
and fittings
£m
Assets under
Construction
£m
Total
£m
Land ¹
£m
Buildings ²
£m
Dwellings
£m
Network ³
£m
Transport
£m
Equipment
£m
Additions - - - - - 3 - - 5 8
Disposals - - - - - (1) - - - (1)

¹ - (land holdings and land underlying buildings);

² - (excluding dwellings);

³ - (including land)

7a. Property, Plant and Equipment (cont.)

Cost or valuation Road
 
ICT
Systems
£m
Fixtures
and fittings
£m
Assets under
Construction
£m
Total
£m
Land ¹
£m
Buildings ²
£m
Dwellings
£m
Network ³
£m
Transport
£m

Equipment
£m
As at 1 April 2018 491 7,129 692 23,485 208 1,197 410 88 1,476 35,176
Prior Year Adjustments - - - - - - - - (3) (3)
Additions 1 34 1 5 11 53 18 1 436 560
Historic valuation adjustments - - - 246 - - - - - 246
Transfers 1 327 2 348 13 44 11 1 (743) 4
Transfers (to)/from Assets Classified as Held for Sale (5) (1) - - - - - - - (6)
Disposals (3) (28) - - (21) (50) (11) (1) - (114)
Revaluations to Revaluation Reserve 4 (14) 3 810 (1) - (2) - 31 831
Revaluations to Outturn Statement (2) (32) (2) - - - - - (41) (77)
Balance at 31 March 2019 487 7,415 696 24,894 210 1,244 426 89 1,156 36,617
Depreciation
As at 1 April 2018 - 351 20 4,090 125 827 320 63 - 5,796
Charged in year - 202 21 88 16 82 30 6 - 445
Historic valuation adjustments - - - 6 - - - - - 6
Transfers - - - - - 3 - - - 3
Transfers (to)/from Assets Classified as Held for Sale - - - - - - - - - -
Disposal - (27) - - (21) (49) (11) (1) - (109)
Revaluations to Revaluation Reserve - (116) (10) 165 - - (2) - - 37
Revaluations to Outturn Statement - (27) (1) - - 2 2 - - (24)
Balance at 31 March 2019 - 383 30 4,349 120 865 339 68 - 6,154
Net book value at 31 March 2019 487 7,032 666 20,545 90 379 87 21 1,156 30,463
Net book value at 31 March 2018 491 6,778 672 19,395 83 370 90 25 1,476 29,380
Analysis of asset financing: Road ICT
Systems
£m
Fixtures
and fittings
£m
Assets under
Construction
£m
Total
£m
Land ¹
£m
Buildings ²
£m
Dwellings
£m
Network ³
£m
Transport
£m
Equipment
£m
Owned 479 4,738 579 17,644 79 363 86 18 635 24,621
Finance Leased - 37 - - 7 1 - - - 45
PFI included in Statement of Financial Position 7 2,193 87 2,901 - - - 2 515 5,705
PFI Residual Interest - - - - - - - - - -
Donated Asset 1 64 - - 4 15 1 1 6 92
Net book value at 31 March 2019 487 7,032 666 20,545 90 379 87 21 1,156 30,463
Donated Asset Movement Road ICT
Systems
£m
Fixtures
and fittings
£m
Assets under
Construction
£m
Total
£m
Land ¹
£m
Buildings ²
£m
Dwellings
£m
Network ³
£m
Transport
£m
Equipment
£m
Additions - 1 - - - 3 - - 2 6
Disposals - - - - - (1) - - - (1)

¹ - (land holdings and land underlying buildings);

² - (excluding dwellings);

³ - (including land)

7b. Property, Plant and Equipment - NHS non-current assets included within note 6a

Cost or valuation Road ICT
Systems
£m
Fixtures
and fittings
£m
Assets under
Construction
£m
Total
£m
Land ¹
£m
Buildings ²
£m
Dwellings
£m
Network ³
£m
Transport
£m
Equipment
£m
At 1 April 2019 361 6,754 25 - 103 1,195 343 86 358 9,225
Additions - 9 - - 8 50 9 2 233 311
Transfers - 204 - - 12 37 20 2 (274) 1
Transfers (to) assets classified held for sale (1) - - - - - - - - (1)
Disposals (18) (1) - - (14) (36) (19) (2) - (90)
Revaluations to Revaluation Reserve 14 28 - - - - - - - 42
Revaluations to Outturn Statement - (14) (1) - - (1) (1) - (11) (28)
At 31 March 2020 356 6,980 24 - 109 1,245 352 88 306 9,460
Depreciation
At 1 April 2019 - 335 1 - 56 825 279 65 - 1,561
Charged in year - 187 1 - 12 76 23 5 - 304
Transfers - - - - - - - - - -
Transfers (to) assets classified held for sale - - - - - - - - - -
Disposal - - - - (14) (35) (19) (1) - (69)
Revaluations to Revaluation Reserve - (184) (1) - - - - - - (185)
Revaluations to Outturn Statement - (27) (1) - - - - - - (28)
At 31 March 2020 - 311 - - 54 866 283 69 - 1,583
Net book value at 31 March 2020 356 6,669 24 - 55 379 69 19 306 7,877
Net book value at 31 March 2019 361 6,419 24 - 47 370 64 21 358 7,664
Analysis of asset financing: Road ICT
Systems
£m
Fixtures
and fittings
£m
Assets under
Construction
£m
Total
£m
Land ¹
£m
Buildings ²
£m
Dwellings
£m
Network ³
£m
Transport
£m
Equipment
£m
Owned 348 4,253 24 - 55 363 68 17 297 5,425
Finance Leased - 32 - - - - - - - 32
PFI included in Statement of Financial Position 7 2,319 - - - 1 1 2 - 2,330
Donated Asset 1 65 - - - 15 - - 9 90
Net book value at 31 March 2020 356 6,669 24 - 55 379 69 19 306 7,877
Donated Asset Movement Road ICT
Systems
£m
Fixtures
and fittings
£m
Assets under
Construction
£m
Total
£m
Land ¹
£m
Buildings ²
£m
Dwellings
£m
Network ³
£m
Transport
£m
Equipment
£m
Additions - - - - - 2 - - 4 6
Disposals - - - - - (1) - - - (1)

¹ - (land holdings and land underlying buildings); ² - (excluding dwellings); ³ - (including land)

7b. Property, Plant and Equipment - NHS non-current assets included within note 5a (Cont.)

Prior Year Land ¹
£m
Buildings ²
£m
Dwellings
£m
Road
Network ³
£m
Transport
£m
Equipment
£m
ICT
Systems
£m
Fixtures
and fittings
£m
Assets under
Construction
£m
Total
£m
Cost or valuation
At 1 April 2018 364 6,441 25 - 99 1,150 329 85 505 8,998
Additions 1 27 - - 2 49 10 1 255 345
Transfers 1 326 - - 13 43 10 1 (392) 2
Transfers (to) assets classified held for sale (5) (1) - - - - - - - (6)
Disposals (3) (2) - - (11) (47) (4) (1) - (68)
Revaluations to Revaluation Reserve 5 (5) - - - - (2) - 31 29
Revaluations to Outturn Statement (2) (32) - - - - - - (41) (75)
At 31 March 2019 361 6,754 25 - 103 1,195 343 86 358 9,225
Depreciation
At 1 April 2018 - 269 1 - 55 787 262 61 - 1,435
Charged in year - 179 1 - 11 79 22 5 - 297
Transfers - - - - - 3 - - - 3
Disposal - (1) - - (10) (46) (4) (1) - (62)
Revaluations to Revaluation Reserve - (86) (1) - - - (2) - - (89)
Revaluations to Outturn Statement - (26) - - - 2 1 - - (23)
At 31 March 2019 - 335 1 - 56 825 279 65 - 1,561
Net book value at 31 March 2019 361 6,419 24 - 47 370 64 21 358 7,664
Net book value at 31 March 2018 364 6,172 24 - 44 363 67 24 505 7,563
Analysis of asset financing: Road ICT
Systems
£m
Fixtures
and fittings
£m
Assets under
Construction
£m
Total
£m
Land ¹
£m
Buildings ²
£m
Dwellings
£m
Network ³
£m
Transport
£m
Equipment
£m
Owned 353 4,182 23 - 47 353 63 18 237 5,276
Finance Leased - 26 - - - 1 - - - 27
PFI included in Statement of Financial Position 7 2,147 - - - 1 1 2 116 2,274
Donated Asset 1 64 1 - - 15 - 1 6 88
Net book value at 31 March 2019 361 6,419 24 - 47 370 64 21 359 7,665
Donated Asset Movement Road Equipment
£m
ICT
Systems
£m
Fixtures
and fittings
£m
Assets under
Construction
£m
Total
£m
Land ¹
£m
Buildings ²
£m
Dwellings
£m
Network ³
£m
Transport
£m
Additions - 1 - - - 3 - - 2 6
Disposals - - - - - (1) - - - (1)

¹ - (land holdings and land underlying buildings);

² - (excluding dwellings);

³ - (including land)

7c. Property, Plant and Equipment Disclosures

2019-20
£m
2018-19
£m
Net book value of Property, Plant and Equipment 30,699 30,463
Total value of assets held under: Finance Leases 49 45
PFI and PPP Contracts 5,451 5,306
Total 5,500 5,351
Total depreciation charged in respect of assets held under: Finance leases 3 5
PFI and PPP contracts 48 49
Total 51 54
Valuations and Basis of Valuation

As part of the 5-year rolling Programme for Scottish Government assets, 12 properties – (3 Kantersted Road, 140 Causewayside, Port Edgar Queensferry, St Andrews House, 3 Lower Auchinlay Dunblane, 10 Keith Street Stornoway, Balivanich Offices, Lag Sornain Balivanich, Saughton House, Sornain View Balivanich, Victoria Quay and Scorrybeck), underwent a formal revaluation as at 31st March 2020. All were inspected with the exception of Victoria Quay and St Andrews House where a desktop valuation was carried out. These valuations were on the basis of Existing Use Value, except Port Edgar which as a surplus asset (which does not qualify as Held for Sale), has been valued to Fair Value under IFRS 13, since there are no market entry restrictions on the property. In addition within the Highlands, properties owned by the Scottish Government, were also valued through a desktop valuation. These valuations were on the basis of Existing Use Value.

Valuations were carried out by the Valuation Office Agency (VOA). These valuations were carried out in accordance with the professional standards of the Royal Institution of Chartered Surveyors: RICS Valuation - Global Standards and RICS UK National Supplement, commonly known together as the Red Book. In particular UK VPGA (Valuation Practice Guidance- Application) 5 addresses the valuation of central government assets for accounting purposes.

In addition to the land and buildings recorded in the core portfolios’ accounts, the consolidated accounts reflect some land and buildings which are specialised operational properties and have been valued at their depreciated replacement cost. As noted in the relevant underlying agency accounts, the open market value of these properties would be significantly lower.

Individual NHS boards have their own revaluation schemes, details of which are available in the various NHS Board accounts. These schemes operate in accordance with Scottish Government policy on revaluation as set out in Note 1.3 to these accounts.

Material Valuation Uncertainty

As per the 2019-20 valuers report, and as stated within the accounting policies note, the 2019-20 valuations are reported on the basis of ‘material valuation uncertainty’ (as per VPS 3 and VPGA 10 of the RICS Red Book Global). This is due to the outbreak of Covid-19, which has impacted global financial markets. Market activity is being impacted in many sectors. As at the valuation date, the VOA considered that they could attach less weight to previous market evidence for comparison purposes, to inform opinions of value. Although the valuer has declared a material valuation uncertainty, the valuer has continued to exercise professional judgement in preparing the valuation and, therefore, this is the best information available as at 31 March 2020 that can be relied upon.

This material valuation uncertainty applied not only to the valuation of the Scottish Government portfolio properties, but also to properties held by the individual Agencies within the consolidation boundary and properties within NHS Trusts. Of the NHS Trust and Scottish Prison Service assets that the material valuation uncertainty applies to, significant proportions relate to specialised assets valued on a depreciated replacement cost basis. Specialised operational assets are valued on a modified replacement cost basis to take account of modern substitute building materials and locality factors only. Here the valuer has based their assessment on the cost of replacing the service potential of the assets and the uncertainty relates to the estimated costs of, rather than the extent of, service potential to be replaced. Further details of the impact of this material uncertainty can be found in the individual NHS Trust accounts and the Scottish Prison Service accounts.

In addition there is a possibility that the valuation of land, including the element that forms part of the trunk road valuation, may have varied as a result of the impact of Covid 19 but it is not possible to apply any estimates to that, as the impact on the road valuation is likely to vary in relation to the location of the land. Further details can be found in Transport Scotland accounts.

8. Intangible Assets

Cost or Valuation Software Licenses
£m
Information Technology Software
£m
Websites that deliver a service
£m
Assets under Development
£m
Total
£m
As at 1 April 2019 160 369 1 48 578
Additions 4 35 - 54 93
Disposals (5) (4) (1) - (10)
Transfers - 50 - (50) -
Revaluations to Outturn Statement - - - - -
Balance at 31 March 2020 159 450 - 52 661
Amortisation
As at 1 April 2019 146 232 1 - 379
Charged in year 6 49 - - 55
Disposals (5) (4) (1) - (10)
Balance at 31 March 2020 147 277 - - 424
Net book value at 31 March 2020 12 173 - 52 237
Net book value at 31 March 2019 14 137 - 48 199
Cost or Valuation Software Licenses
£m
Information Technology Software
£m
Websites that deliver a service
£m
Assets under Development
£m
Total
£m
As at 1 April 2018 161 326 1 30 518
Additions 3 7 - 66 76
Disposals (5) (4) - - (9)
Transfers 1 40 - (41) -
Revaluations - - - (7) (7)
Balance at 31 March 2019 160 369 1 48 578
Amortisation
As at 1 April 2018 143 200 1 - 344
Charged in year 8 36 - - 44
Disposals (5) (4) - - (9)
Balance at 31 March 2019 146 232 1 - 379
Net book value at 31 March 2019 14 137 - 48 199
Net book value at 31 March 2018 18 126 - 30 174

9. Assets Classified as Held for Sale

The following assets have been presented for sale by the Scottish Government. The completion date for sale is expected to be within 12 months. Assets classified as held for sale are measured at the lower of their carrying amount immediately prior to their classification as held for sale and their fair value less costs to sell.

Assets classified as held for sale are not subject to depreciation or amortisation.

Property Plant and Equipment
£m
Intangible Assets
£m
Investment Assets
£m
Total
£m
As at 1 April 2019 16 - - 16
Transfers from Non-Current Assets 2 - - 2
Disposals (7) - (7)
Fair Value Adjustment (1) - - (1)
Balance at 31 March 2020 10 - - 10
Prior year
As at 1 April 2018 17 - - 17
Transfers from Non-Current Assets 6 - - 6
Disposals (3) - - (3)
Impairments (4) - - (4)
Balance at 31 March 2019 16 - - 16

10. Inventories

2019-20
£m
2018-19
£m
NHS inventories 138 118
Other inventories 4 3
Total 142 121

11. Financial Assets

11a. Non-Current Financial Assets

Interests in Nationalised Industries and Limited Companies
£m
Voted Loans
£m
NLF Loans
£m
Student Loans
£m
Housing Loans
£m
Shared equity Loans
£m
Related Loans
£m
EU CAP Loans
£m
Other Funds
£m
Total
£m
Balance at 1 April 2019 27 3,193 564 3,309 193 944 142 - 99 8,471
Add element reported within current assets - 97 27 150 16 - 4 256 1 551
Advances and Acquisitions Cash Advances - 382 - 621 121 116 65 382 88 1,775
Capitalised interest - - - 137 - - - - - 137
Transfers - - - - - - - - - -
Repayments and disposals - (96) (27) (173) (5) (71) (11) (445) (5) (833)
Fair Value Adjustment - - (299) (44) 19 - - - (324)
Unwinding of discounted cash flow - - - (35) (16) 17 - - - (34)
Impairments - - - - - - - - (5) (5)
Write offs and adjustments (2) - - - - - (11) - (4) (17)
Balance at 31 March 2020 25 3,576 564 3,710 265 1,025 189 193 174 9,721
Loans repayable within 12 months transferred to current assets (107) (33) (160) (6) (1) (193) (21) (521)
Balance at 31 March 2020 25 3,469 531 3,550 259 1,025 188 0 153 9,200

Investments have been measured and presented in accordance with IAS 32, IAS 39, IFRS 13 and IFRS 9 as modified by the Government Financial Reporting Manual (FReM). See also note 1.7

Scottish Water National Loans Fund repayments of £27m have not been included in the Environment, Climate Change and Land Reform portfolio capital outturn.

11a. Non-Current Financial Assets (continued)

Interests in
Nationalised
Industries
and Limited
Companies
£m
Voted
Loans
£m
NLF
Loans
£m
Student
Loans
£m
Housing
Loans
Restated (1)
£m
Housing
Shared equity
Loans
Restated (1)
£m
Energy
Related
Loans
£m
EU CAP
Loans
£m
Other
Funds
£m
Total
£m
Balance at 1 April 2018 25 2,985 591 3,291 173 869 127 1 179 8,241
Add element reported within current assets - 84 31 145 9 - 1 322 3 595
Advances and Acquisitions
Cash Advances - 308 - 615 56 140 30 425 74 1,648
Capitalised interest - - - 75 - - 1 - - 76
Transfers 2 (2) -
Fair value adjustment - - - (590) (14) 7 - - - (597)
Fair value adjustment - prior year adjustment (2) - - - - - (17) - - - (17)
Write offs - - - - - - (11) - (130) (141)
Repayments and disposals - (87) (31) (152) (15) (55) (2) (492) (24) (858)
Unwinding of discounted cash flow - - - 75 - - - - - 75
Balance at 31 March 2019 27 3,290 591 3,459 209 944 146 256 100 9,022
Loans repayable within 12 months transferred to current assets - (97) (27) (150) (16) - (4) (256) (1) (551)
Balance at 31 March 2019 27 3,193 564 3,309 193 944 142 - 99 8,471

Note (1) - the split of housing loans between Shared Equity housing loans and Other housing loans has been restated to correct an inconsistency with the allocation, noticed during the preparation of the 2019-20 accounts.

The total Housing Loans of £1,042m at 1 April 2018 and £1,170m at 31 March 2019 has not changed.

Note (2) - An adjustment has been processed to account for an additional fair value adjustment to the Shared Equity Housing assets noted in year, that relates to a change in interest rate which should have been applied in 2018-19.

11b. Nationalised Industries

As at 31 March 2020, the Scottish Ministers are the sole shareholder in Caledonian Maritime Assets Limited, David MacBrayne Limited, Highlands and Islands Airports Limited, TS Prestwick Holdco Limited and Ferguson Marine (Port Glasgow) Holdings Limited. The Scottish Ministers hold the following investments:

  • Caledonian Maritime Assets Limited
    1,500,000 ordinary shares of £10 each
  • David MacBrayne Limited
    5,500,002 ordinary shares of £1 each
  • Highlands and Islands Airport Limited
    50,000 ordinary shares of £1 each
  • TS Prestwick Holdco Limited
    1 ordinary share of £1
  • Ferguson Marine (Port Glasgow) Holdings Limited
    1 ordinary share of £1

These organisations are operated and managed independently of the Scottish Government, and, therefore, do not fall within the consolidated portfolio accounting boundary. The companies each publish an individual annual report and accounts. The net assets and results of the aforementioned companies are summarised in the table below.

TS Prestwick Holdco Ltd
£m
Highlands and Islands Airports Ltd
£m
Caledonian Maritime Assets Ltd
£m
David MacBrayne Ltd
£m
Net Assets/(Liabilities) as at 31 March 2020 (29) (29) 57 24
Turnover 36 24 49 224
Profit /(Loss) for the financial year 5 (4) 8 1

All results are draft and subject to audit with final accounts yet to be published.

Due to the extension given to Companies House filing requirements through the Companies etc. (Filing Requirements) (Temporary Modifications) Regulations 2020, which extends the deadline for private companies to file their accounts from 9 months to 12 months, draft figures are not yet available for Ferguson Marine Holdings Ltd.

Caledonian Maritime Assets Limited

Following a restructure of the Caledonian MacBrayne group in 2006, Caledonian MacBrayne Limited became known as Caledonian Maritime Assets Limited (CMAL) and CalMac Ferries Limited (CFL) was incorporated. CFL took over operation of the Clyde & Hebrides Ferry Services as successor to Caledonian MacBrayne Limited. CMAL retained ownership of all vessels and ports, which it leases to the operator of the Clyde & Hebrides Ferry services (currently CFL). CMAL remains wholly owned by Scottish Ministers.

David MacBrayne Limited

Scottish Ministers previously owned 2 shares of £1 in a dormant company, David MacBrayne Limited. In the course of the restructuring of the Caledonian MacBrayne group in 2006, Scottish Ministers’ shareholding in David MacBrayne Limited was increased by 5,500,000 shares to 5,500,002 ordinary shares of £1. David MacBrayne Limited is now the holding company for the ferry operating companies CalMac Ferries Limited and Argyll Ferries Limited.

Highlands and Islands Airport Limited (HIAL)

Scottish Ministers are the sole shareholders in HIAL. The company's purpose is to maintain the safe operation of its airports to support economic and social development in the Highland and Islands. HIAL currently operates 11 airports; 10 in the Highlands and Islands and also Dundee, which it assumed responsibility for in December 2007 and now operates via a wholly owned subsidiary company, Dundee Airport Limited.

TS Prestwick Holdco Limited

In 2013 Transport Scotland purchased the entire share capital of Prestwick Aviation Holdings Limited, the holding company of subsidiaries who own and operate Glasgow Prestwick Airport, through a company set up for this specific purpose – TS Prestwick Holdco Limited. Subsequently Transport Scotland advanced loan funding to the group to cover the cash deficit arising from its operating deficit and capital expenditure.

Ferguson Marine

In December 2019 the Ferguson Marine shipyard was brought into public ownership. This followed over two years of support from the Scottish Government to find a resolution to the difficulties at Ferguson Marine and the Scottish Government's priorities still remain the completion of the two public sector ferries, protecting jobs, and securing a long-term future for the yard. Scottish Ministers hold 1 £1 share in Ferguson Marine (Port Glasgow) Holdings Limited.

Further information on the background to the company being taken into public ownership can be found on the Scottish Government website at:

https://www.gov.scot/collections/ferguson-marine-documents/

11c. Other Interests

Student Loan Company (SLC)

The Student Loan Company is a non-departmental public body which administers the payment and collection of loans to UK students. When it was set up in 1990, it was wholly owned by the Secretary of State for Education and Skills (now the Department for Education) and the Secretary of State for Scotland. From 1 July 1999, the student support function was transferred to the Scottish Ministers with respect to students ordinarily resident in Scotland. Following a restructuring the Scottish Ministers hold 1 share with a nominal value of £0.50 (5% of the equity) in the SLC.

Scottish Futures Trust Ltd (SFT)

The Scottish Futures Trust was set up in September 2008 to work collaboratively across the public sector to secure improved value for money in infrastructure procurement, and is working jointly with local authorities, NHS Boards and other public bodies to deliver benefits in cost effective asset procurement and management. The SFT is a limited company owned by the Scottish Ministers with share capital of £100, £2 of which has been issued and is held by the Scottish Ministers.

Scottish Health Innovations Ltd

Scottish Health Innovations Ltd is a company that works in partnership with NHS Scotland to protect and develop healthcare innovations. The company is limited by guarantee with three members, the Scottish Ministers, the National Waiting Times Centre, and NHS Tayside.

11d. Interests in Nationalised Industries and Limited Companies

The Scottish Ministers hold an interest in the following organisations:

Student Loan Company (SLC)

The Student Loan Company is a non-departmental public body which administers the payment and collection of loans to UK students. When it was set up in 1990, it was wholly owned by the Secretary of State for Education and Skills (now the Department for Education) and the Secretary of State for Scotland. From 1 July 1999, the student support function was transferred to the Scottish Ministers with respect to students ordinarily resident in Scotland. Following a restructuring the Scottish Ministers hold 1 share with a nominal value of £0.50 (5% of the equity) in the SLC.

Scottish Futures Trust Ltd (SFT)

The Scottish Futures Trust was set up in September 2008 to work collaboratively across the public sector to secure improved value for money in infrastructure procurement, and is working jointly with local authorities, NHS Boards and other public bodies to deliver benefits in cost effective asset procurement and management. The SFT is a limited company owned by the Scottish Ministers with share capital of £100, £2 of which has been issued and is held by Scottish Ministers.

Scottish Health Innovations Ltd

Scottish Health Innovations Ltd is a company that works in partnership with NHS Scotland to protect and develop healthcare innovations. The company is limited by guarantee with three members, the Scottish Ministers, the National Waiting Times Centre, and NHS Tayside.

Burntisland Fabrications

Over the past two financial years the Scottish Government has advanced loans on a commercial basis to BiFab. As a result of the conversion of these loans to equity the Scottish Government now holds a 32.4% stake in the company. As part of year end processes the Scottish Government valued its equity holding at £nil (2018-19: £2m).

11e. Loans

The loans issued and reported as Financial Assets within these accounts have been valued reflecting current market expectations regarding discounted future cash flows. Under IFRS 13, these valuations have been classed as level 3 unobservable inputs, as there is no active market for the investments.

Voted Loans

The Scottish Ministers have provided total loans from voted provision of £4m to crofters for building purposes, £232m to Caledonian Maritime Assets Limited for the construction of new shipping and £3,340m to Scottish Water for their capital investment Programmes. In year £344m of advances were provided to Scottish Water (2018-19 £288m of advances) and £38m to Calmac (2018-19 £19m of advances).

National Loans Fund

Prior to 1 July 1999, the Secretary of State loaned money to Scottish Enterprise, Scottish Homes and the three Water Authorities (now Scottish Water), from the National Loans Fund. At 1 July 1999, the right to the sums outstanding was transferred to the Scottish Ministers who must pay the repayments and interest to the Secretary of State for Scotland via the Scottish Consolidated Fund. The loans to Scottish Enterprise and Scottish Homes have since been repaid. The NLF loans remaining are with Scottish Water.

Scottish Water's 2019-20 annual report and accounts can be found at:

www.scottishwater.co.uk/help-and-resources/document-hub/key-publications/annual-reports

Student Loans

Loans made under the terms of the student loans scheme are administered by the Student Loans Company Limited, a company owned jointly by the Scottish Ministers and the Department for Education. These loans are accounted for on the basis of the loan balances of students domiciled in Scotland and adjusted for fair value and impairment. Further details on student loan valuation are in note 11f.

Housing Loans

Housing Loans include repayment and deferred loans, for the build or purchase of residential properties, including the delivery of affordable housing. The fair value estimation technique for the loans relates to the underlying property valuations using the Nationwide Pricing Index method, where applicable.

Information on current purchase schemes is available at:

https://www.mygov.scot/housing-local-services/buy-own-property/getting-help-to-buy/

11e. Loans (continued)

The main Housing loan schemes are:

Charitable Bonds

The Charitable Bond model means the Scottish Government can make an ethical investment in affordable housing in the form of loans to social housing providers for up to 15 years, repaid at the end of the term. As at 31 March 2020 a total of £146m (31 March 2019: £91m) was held on Charitable Bond schemes after fair value adjustments. In 2019-20 the Scottish Government invested £88m in Charitable Bonds in year to be repaid in 2030 & 2035 (2018-19: £38m advances).

Mid Market Rented Housing

Mid-market rent (MMR) is a type of affordable housing where rents are lower than in the private market, but higher than social housing. The Scottish Government supports the delivery of MMR through the mainstream grant-funded Affordable Housing Supply Programme, as well as enable innovative funding solutions that build on the success of Scottish Government-supported schemes, such as the National Housing Trust initiative (NHT) and the Local Affordable Rented Housing Trust (LAR).

During 2019-20 £21m was advanced (2018-19: £7m) through MMR schemes. As at 31 March 2020 a total of £37m (31 March 2019: £26m) was held on MMR schemes after fair value adjustment.

Housing Infrastructure Funds

As part of the More Homes Scotland approach and linked to the delivery of 50,000 affordable homes by 2021, the Scottish Government launched a five-year Housing Infrastructure Fund (HIF) in February 2016. HIF will support the delivery of housing through financial assistance. While all types and tenures of housing are eligible for HIF support, priority will be given to those projects delivering affordable and private rented housing within the five-year period ending 31 March 2021.

£12m was advanced during 2019-20 (2018-19: £0.1m). As at 31 March 2020 a total of £20m (31 March 2019: £8m) was held on HIF funds.

Rent to Buy

Aimed at rural communities, the Rent to Buy Scheme (RTBS) aims to help people who wish to become home owners by allowing them to rent a home for up to 5 years whilst saving up for a deposit.

As at 31 March 2020 a total of £5m (31 March 2019: £7m) was held on RTBS funds.

Shared Equity Housing Loans

Shared Equity Housing loans include Shared Equity Housing and Deferred Financial Commitment Loans. The fair value estimation technique for the loans relates to the underlying property valuations using the Nationwide Pricing Index method.

Shared Equity Stakes

The Scottish Government owns shared Equity stakes, purchased from 1 April 2008. These are not loans but equity stakes and have no payment schedules. They are repaid when the purchaser decides to sell the property.

As at 31 March 2020 £108m was held (31 March 2019: £121m) after fair value adjustments. £16m of repayments were made in year (2018-19: £20m repayments)

Shared Equity Schemes

The Open Market Shared Equity (OMSE) and New Supply Shared Equity (NSSE) schemes are available across Scotland. They are open to first-time buyers in particular priority access groups. OMSE is for purchases off the open market, whilst NSSE is for purchases from local councils and housing associations. They help first time buyers to purchase a property without having to fund its entire cost. Buyers will pay for the biggest share which is usually between 60% and 90% of the home's cost. The Scottish Government holds the remaining share under a shared equity agreement.

£52m was advanced during 2019-20 (2018-19: £77m) and £34m repayments were made (2018-19: £27m). As at 31 March 2020 a total of £340m (31 March 2019: £322m) was held on OMSE and NSSE funds after fair value adjustments.

Help to Buy

The Help to Buy (Scotland) scheme helps with the purchase of new-build homes without the need for a large deposit. With the Affordable New Build and Smaller Developers Schemes the buyer will pay a minimum of at least 85% of the home's total purchase price and the Scottish Government will hold the remaining % share under a shared equity agreement.

£54m was advanced during 2019-20 (2018-19: £60m) and £35m repayments were made (2018-19: £23m). As at 31 March 2020 a total of £502m (31 March 2019: £471m) was held on both Help To Buy funds after fair value adjustments.

First Home Fund

Launched in December 2019, the First Home Fund is a £200 million shared equity pilot scheme to provide first-time buyers with up to £25,000 to help them buy a property that meets their needs and is located in the area where they want to live. It is open to all first-time buyers in Scotland and can be used to help buy both new build and existing properties.

£8m was advanced during 2019-20 (2018-19: £nil).

Energy Related Loans

The Scottish Government provides funding to Salix Finance Limited and the Energy Saving Trust (EST) to deliver Programmes relating to energy efficiency which include the issue of loans.

  • Salix provides loans to the public sector to improve their energy efficiency and reduce their carbon emissions. In 2019-20 £5m (2018-19: £4m) of advances were made. At 31 March 2020 £28m (2018-19: £23m) was held as loan funds.
  • EST administer and manage funds on behalf of the Scottish Government which provide loans to save energy and reduce carbon dioxide emissions. In 2019-20 £6m (2018-19 £5m) of advances were made. At 31 March 2020 £61m (2018-19: £56m) was held as loan funds.

Through the Home Energy Efficiency Programme (HEEPs) loans are available to help homeowners make energy and money saving improvements to their home. In 2019-20, advances of £4m (2018-19: £5m) were made. At 31 March 2020 £26m (2018:19: £23m) was held on HEEPs loans.

11e. Loans (continued)

The Renewable Energy Investment Fund (REIF) is delivered through Scottish Enterprise and Highlands and Islands Enterprise. REIF provides funding to commercial and community renewable energy projects across Scotland. In 2019-20 £10m (2018-19 £nil) of advances were made and £10m (2018-19: £nil) of repayments were received. At 31 March 2020 £8m (2018-19: £9m) was held as loan funds.

Transport Scotland provides funding to the Energy Savings Trust to fund energy efficient transport initiatives, including the Electric Vehicle Loan and electric Taxi support, the Low Carbon Transport Business Loan and eBike loan support. In 2019-20 £40m (2018-19 £17m) of advances were made. At 31 March 2020 £72m (2018-19: £33m) was held as loan funds.

Further information on the loans provided through the Energy Savings Trust can be found at:

https://energysavingtrust.org.uk/scotland/grants-loans

EU CAP Loans

From 2015-16, a Scottish Government national loans scheme was put in place to provide support to the farming economy. In 2019-20, advances of £383m (2018-19: £425m) were made with repayments of £444m (2018-19: £492m); £3.4m of loans advanced prior to 2019-20 are outstanding and have been provided for or are expected to be fully recovered in 2020-21.

Other Funds

Social Investment Scotland administer and manage the Scottish Investment Fund on behalf of the Scottish Government, the fund was set up to provide loans to build capacity, capability and financial sustainability in the third sector. As at 31 March 2020 £16m (2018-19: £16m) was held as loan funds.

The Scottish Government and the European Regional Development Funds, have established the Scottish Partnership for Regeneration in Urban Centres (SPRUCE) Fund. This fund is a JESSICA (Joint Venture Support for Sustainable Investment in City Areas) Urban Development Fund (£50m; 2018-19: £50m) that helps fund regeneration and energy efficient projects within targeted areas of Scotland.

Over the past 5 years, the Scottish Government has provided £10m to the Scottish Futures Trust for use in their oversight of the Non Profit Distributing (NPD) Programme. SFT’s pipeline of NPD projects is delivered through two channels – very large projects such as major roads or large hospitals, procured directly by the public sector organisations through the NPD Programme, with smaller Design, Build, Finance and Maintain (DBFM) projects delivered via the Scotland-wide hub initiative in partnership with local authorities, health boards and other public bodies.

The Scottish Government has provided £10m, over a 20 to 25 year period, to three of the National Performing Companies (Scottish Ballet, Scottish Opera and the National Theatre of Scotland). These related to capital projects and business support, including the new Rockvilla creation centre and an extension to the Theatre Royal, both in Glasgow. As at 31 March 2020 £9m (2018-19: £9m) was held as the loan balance.

Scottish Enterprise administer and manage Digital Development Loans on behalf of the Scottish Government. Digital development loans are provided to companies who wish to improve their digital capabilities and capacity. During 2019-20 £14m (2018-19: £9m) advances were made. At 31 March 2020 £21m (2018-19: £9m) was held as loan funds.

The Scottish Growth Scheme is a package of financial support of up to £500 million for Scottish businesses. It's backed by the Scottish Government and aims to help businesses grow. £13m was provided to the fund managers in 2019-20 for distribution (2018-19: £nil).

Building Scotland Fund (BSF) is a precursor to the Scottish National Investment Bank. It focuses on housing, modern industrial and commercial property and business-led research and development projects. The BSF intends to invest £150 million over financial years 2019 to 2021 by making loans and acquiring equity. In 2019-20 £13m (2018-19: £nil) of advances were made.

In 2019-20 £15m (2018-19: £nil) was advanced through the Registered Social Landlords (RSL) Fire Safety Loan scheme to cover the cost of buying and installing smoke, heat and carbon monoxide alarms to meet new standards.

In 2019-20, the Scottish Government provided commercial loans of £9m (2018-19: £48m) to private companies. In 2019-20 this relates solely to a loan provided to Burntisland Fabrications Limited, this is disclosed within Other Funds within Note 11a and has been fully written off in year. As noted in note 11d above, the equity stake held in Bifab has also been written down to nil value in year. Further information on Bifab is included in the Performance Report.

11f. Student Loan Valuation

Student loans are valued in accordance with IFRS 9, and are recognised at fair value through the Statement of Comprehensive Net Expenditure (SOCNE). The value at any time is dependent upon macroeconomic conditions, forecast over the long term 30 year repayment profile.

The estimated value is determined at using a discounted cash flow model known as the Stochastic Earnings Path (StEP) model. This model is used across the devolved administrations and is managed by the UK Department for Education (DfE) using various data sources on higher education students in order to predict their likely repayments of loans. There is a standard cycle and process for the production of valuation and modelling information: for the financial year-end reporting, and for mid-year forecasting and adjusting budgets as necessary for the Scottish and UK Government fiscal events.

Forecasting Model background

The StEP model uses information from two sub-models, an earnings model and a repayments model, to predict outcomes for student borrowers. The earnings model calculates earnings “paths” for individual borrowers after graduation and the repayment model takes these earnings paths, and applies a number of repayment rules to generate the repayments. The earnings model uses input variables such as course level, domicile and subject studied to estimate earnings in future years. The repayment model uses macroeconomic forecasts such as RPI, interest rates and earnings growth to predict the repayments in line with each earnings “path”. The model is long-term in nature and depends on a complex set of assumptions, particularly, the latest Office of Budget Responsibility long-term and medium-term forecasts for RPI, Bank of England base rate and earnings growth. These forecasts are generally updated twice per year. The valuation of the student loan books is uncertain as they are highly dependent on macroeconomic circumstances and graduate earnings over the next 30 years, as well as a number of other complex assumptions.

Key inputs to the model include:

  • Student Loans Company data – used for borrower characteristics, loan amounts and for derivation of earnings and employment models and income distribution in early career stages. Also used in frictional adjustments, such as part-year employment models.
  • British Household Panel Survey (BHPS) data – used for derivation of earnings and employment models and income distributions, especially later career stage earnings and steady state models.
  • Labour Force Survey data – to convert income percentiles to cash amounts, regarded as more reliable than cash values from BHPS due to large sample sizes.
  • Destinations of Leavers from Higher Education survey – used in the graduate age adjustment, taking into account different earnings profiles of mature and typical age borrowers in early career stages.
  • Office of National Statistics life tables – data on deaths.
  • UCAS – forecasts of student numbers which come via another model within Higher Education.
  • HESA data – course lengths and drop outs.
  • OBR macroeconomic forecasts – forecasts of earnings growth, Bank of England base rates, and RPI.

When the model is received by the Scottish devolved administration, further work is required to tailor the content of each model to the circumstances only relevant to the Scottish loan policy. For example, the increase to the student loan repayment threshold from 2021/22 has been factored in and included in the model tailored for the Scottish Student Loan book.

The information as at 31 March 2020 was prepared using the OBR Economic and Fiscal outlook published on 11 March 2020 which was provided by the Department for Education to the devolved administrations for updating the Stochastic Earnings Path model. For further information on this economic scenario see the OBR website:

https://obr.uk/efo/economic-and-fiscal-outlook-march-2020/

11f. Student Loan Valuation (continued)

Forecasting Model updates

Given the significant number of varying factors that are considered for each revision of the model, and the customisation required, it is not the policy of Scottish Government to make amendments outside of the usual annual cycle. Generally, the model is updated twice a year and usually coincides with the OBR’s latest economic and fiscal outlook publication which is produced twice a year. A significant point is that the detail from OBR is caveated by them that these forecasts become ‘out of date’ very quickly. However given the time it takes to process forecasts, it is unrealistic to undertake amendment more frequently than this. COVID-19 has impacted this year’s valuation process because it has increased the uncertainty of the immediate and medium-term economic outlook.

This version uses OBR forecasts from March, as determined by Department for Education. The OBR published new macroeconomic scenarios for three COVID-19 scenarios in mid-July. The macroeconomic forecasts for the central scenario were used to update the StEP model, which were provided to Scottish Government in September 2020.

COVID-19 impact on student loan valuations

The emergence of COVID-19 has resulted in increased volatility in macroeconomic data due to the unpredictable and wide-ranging impact of the pandemic.

The OBR issued multiple economic scenarios (upside, central and downside) in April and July 2020 in response to COVID-19. The April 2020 scenarios detailed a significant worsening of the economy over the short term but were also highly volatile in their scenario predictions because of the inherit uncertainty at that time. The July 2020 scenarios were much less volatile as they were able to incorporate the impact of increased economic certainty resulting from stabilising measures adopted by government in direct response to COVID-19. For further information on this economic scenario see the OBR website:

https://obr.uk/fsr/fiscal-sustainability-report-july-2020/

Recognising the uncertainties affecting any valuations as at 31st March, Scottish Government have considered whether the Stochastic Earnings Pathway model based on the July OBR scenarios, published in the Fiscal Sustainability Report, might provide a more appropriate basis for these accounts. In line with other devolved administrations we have concluded that it would not, given the significant changes in economic conditions post year end and the further uncertainties inherent in any subsequent forecasts. As at 31st March, although there had been a reduction in the Bank of England base rate, the UK had only been in lockdown for less than one week. In September it had been 6 months and it was felt that there had been significant change in outlook in September that would just not have been the case at the end of the 2019/20 financial year. The model is based on the OBR’s March 2020 economic forecasts more accurately reflected the circumstances at 31st March, whereas the parameters in the model at 29th September did not as economic conditions had changed.

Sensitivity Analysis

As described above, there are a number of variables used in the model, and adjusting any of these variables will have an impact on the overall valuation. Each of these variables can be adjusted independently of the others, resulting in a large number of combinations, so the choice of alternative scenarios is extensive. We have chosen the parameters carefully to reflect what we believe to be the most accurate position at the reporting date, but we recognise that adjusting these variables will have an impact on the valuation.

In specifically considering the reductions in the Bank of England base rate change in March 2020. Interest rate changes are included within the model with a quarterly profile, therefore the reduction from 0.75% to 0.1% in March, would be reflected as 0.75% to 0.61% in Q4 of financial year 2019-20, in a model which considers 50 years of interest predictions.

We have also considered the impact of using the July OBR forecasts on the student loan valuation. Using the September version of the model, the difference from the previous version amounted to an increase in the impairment of £144.6m. This reflects post year-end changes in economic conditions, including the estimated impact of response measures, and will instead be considered within the financial year 2020-21 estimates. As noted above, we have not used this valuation for the position as at 31 March 2020.

EU Exit impact on student loan valuations

Up to the expected exit of the Transition Period in December 2020, there are extreme levels of uncertainty as to the impact any exit scenario will have on macroeconomic data, and on the student loan book. The student loan valuation has previously based assumptions over macroeconomic data on the published OBR forecasts. As the current forecasts have been prepared assuming an orderly exit from the EU, we have assessed it appropriate to continue to value the student loan book under the current basis of assumptions in place.

12. Financial Instruments

The Scottish Government measures and presents financial instruments in accordance with International Accounting Standard (IAS) 32, International Financial Reporting Standard (IFRS) 7 and IFRS 9 as interpreted by the Financial Reporting Manual. IFRS 7, Financial Instruments: Disclosures, requires disclosure of the role that financial instruments have played during the period in creating or changing the risks that an entity faces in its activities. The Scottish Government is not exposed to the degree of financial risk faced by business entities because of the largely non-trading nature of its activities and the way that government is financed. Moreover, financial instruments play a much more limited role in creating or changing risk than would be typical of the listed companies to which IFRS 7 mainly applies. Financial assets and liabilities are generated by day to day operational activities and are not held to change the risks facing the Organisation in undertaking its activities.

Liquidity Risk

The Scottish Parliament makes provision for the use of resources by the Scottish Government, for revenue and capital purposes, in a Budget Act for each financial year. Resources and accruing resources may be used only for the purposes specified and up to the amounts specified in the Budget Act. The Act also specifies an overall cash authorisation to operate for the financial year. The Scottish Government is not, therefore, exposed to significant liquidity risks.

A maturity profile of the carrying amount of financial liabilities is presented below. This analysis satisfies the disclosure requirements of International Financial Reporting Standard 7, Financial Instruments: Disclosures (IFRS 7). The maturity profile for NLF loans is matched by the corresponding profile for the related fixed asset investments. The amounts disclosed are undiscounted cash flows as per IFRS 7.

Maturity Profile
Financial Liabilities <1yr
£m
1 - 2 yrs
£m
2 - 5 yrs
£m
>5yrs
£m
2019-20
Total
£m
2018-19
Total
£m
Trade payables 726 - - - 726 504
Accruals 1,463 1 1,464 1,563
Other payables 353 8 - - 361 443
NLF loans 33 50 208 273 564 591
Accrued Interest due on NLF Loans 8 - - - 8 8
Balances Payable to SCF 27 - - - 27 24
Corporate balance with SCF 888 - - - 888 979
PFI Deferred Residual Interest - - - - - -
PFI Imputed finance leases 100 98 342 2,519 3,059 3,115
Lease payables 2 1 6 15 24 23
Bank overdraft 1 - - - 1 -
Other financial liabilities 1 50 - - 51 -
Total 3,602 208 556 2,807 7,173 7,250

Credit risk

Credit risk is the risk that a third party will default on its obligations. The maximum exposure to credit risk at the balance sheet date in relation to each class of financial asset is the carrying amount of those assets net of any impairment. No collateral is held as security.

Cash at bank is held with major UK banks. The credit risk associated with cash at bank is considered to be low.

The only area where the Scottish Government has significant concentrations of credit risk is on student loans. The Scottish Government has a statutory obligation to issue student loans and seek repayments in line with legislation. The Scottish Government is not permitted to withhold loans on the basis of poor credit rating nor is it able to seek collateral. The Scottish Government is therefore exposed to the risk that some student loans will not be repaid, although this is partly mitigated by the fact that most repayments are collected by Her Majesty's Revenue and Customs as part of the tax collection process. In addition this risk is mitigated through the valuation of student loans at fair value (= amortised cost).

12. Financial Instruments (Cont.)

Market risks

There are a number of areas where the Scottish Government is exposed to potential market risk. These relate to interest rates, foreign currency risk and housing market risks.

Interest Rate Risk

67% (2018-19: 65%) of the Scottish Government’s financial assets and 100% (2018-19:100%) of its financial liabilities carry nil or fixed rates of interest and it is not therefore exposed to significant interest rate risk. The portion of the Scottish Government's financial assets that carry a floating rate of interest relates in the main to student loans.

Foreign Currency Risk

Within payables, the Scottish Government has a balance that is subject to exchange rate fluctuations. This relates to advances received from the European Commission (EC) for the 2014-20 European Structural Funds (ESF) Programme. The year end balance of £28.5m is the sterling equivalent of €32m translated at the accounting date (using the official EU exchange rate as at 31 March 2020).

The Scottish Government has instituted funding advances for certain EU CAP payments. Following EU Exit, Euro denominations were sold once EU funding was received. As at 31 March the year end balance of £95.5m is the sterling equivalent of €106.9m.

Where there are other transactions denominated in Euros the exchange rate is managed within the Programmes.

The Scottish Government has no other significant exposure to foreign currency risk.

Housing Market Risk

The Scottish Government engages in a number of shared equity housing schemes, and is exposed to the risk of potential falls in the value of the housing market. The current investment in such schemes is £1,025m (2018-19: £944m).

Categories of financial assets and financial liabilities

The Scottish Government has the following categories of financial assets and financial liabilities:

Financial Assets Note At fair value through P&L
Note a
£m
Loans and receivables
Note b
£m
Shares held in or loans advanced to the public sector
Note c
£m
2019-20
Total
£m
2018-19
Total
Restated
£m
Voted loans 11a 3,576 3,576 3,290
NLF loans 11a 564 564 591
Housing loans 11a 265 265 209
Shared Equity Housing loans 11a 1,025 1,025 944
Energy related loans 11a 189 189 146
EU CAP funds 11a 193 193 256
Other Funds 11a 174 174 100
Student loans 11a 3,710 3,710 3,459
Interests in nationalised industries 11a 25 25 27
Trade receivables 13 65 65 55
Accrued income 13 663 663 749
Interest receivable 13 35 35 33
Amounts receivable from the SCF 13 - - -
Deposits and advances 13 1 1 -
Other receivables 13 93 93 85
Corporate balance with the SCF 13 1 1 -
Cash and cash equivalents 2 970 970 1,020
Total 3,975 3,409 4,165 11,549 10,964

Note: As not all current assets are financial instruments, the above tables exclude VAT £55m (2018-19: £66m) and prepayments £391m (2018-19: £359m) which are included in the associated asset notes.

12. Financial Instruments (Cont.)

Financial Liabilities Note Fair Value through Profit and Loss
Note a
£000s
All other financial liabilities
Note d
£000s
Shares held in or loans advanced to the public sector
Note c
£000s
2019-20
Total
£000s
2018-19
Total
£m
Trade payables 14 703 703 504
Accruals 14 1,463 1,463 1,563
Other payables 14 361 361 443
NLF loans 14 564 564 591
Accrued Interest due on NLF Loans 14 8 8 8
Balances payable to the SCF 14 27 27 24
Corporate balance with SCF 14 888 888 979
PFI Imputed finance leases 14 3,059 3,059 3,115
Lease payables 14 23 23 23
Bank overdraft 14 1 1 -
Financial guarantees 14 - -
Derivative financial instruments 14 - -
Other financial liabilities 14 51 51 -
Total - 6,576 572 7,148 7,250

Note: As not all liabilities are financial instruments, the above tables exclude deferred income £89m (2018-19: £132m), other tax and social security £155m (2018-19: £146m), superannuation payable £133m (2018-19:£102m) and employee benefit accrual £77m (2018-19: £68m) included in the associated liabilities note (note 14). The finance leases are disclosed at the discounted cash flow value.

Note a: Assets and liabilities held at fair value through the profit and loss are measured at fair value with gains or losses being accounted for through the outturn statement.

Note b: Loans and receivables are measured at amortised cost using the effective interest methods, and any impairment losses go through the outturn statement. Disposal may give rise to a gain or loss, which is recognised through the outturn statement.

Note c: Shares in the public sector are held at historic cost less impairment and any impairment losses go to the outturn statement. Loans advanced to the public sector or due to the NLF are measured in the same manner as in note (b)

Note d: All other financial liabilities will be measured at fair value initially and subsequently at amortised cost.

The fair value of financial instruments is equivalent to the carrying value disclosed in the financial statements. No financial assets and financial liabilities have been offset and presented net in these accounts.

13. Receivables and Other Assets

Amounts falling due within one year: 2019-20
£m
2018-19
Restated
£m
Trade receivables 65 55
VAT 55 66
Deposits and advances 1 -
Other receivables 71 70
Prepayments and accrued income 515 371
Accrued income relating to EU funding 459 483
Interest receivable 35 33
Reimbursement of CNORIS provisions - -
Balances receivable from SCF - -
PFI Prepayment - -
Corporate balance with the SCF 1 -
Derivative financial instruments - -
Balance as at 31 March 1,202 1,078
Amounts falling due after more than one year:
2019-20
£m
2018-19
Restated
£m
Trade receivables - -
Deposits and advances - -
Other receivables 22 15
Prepayments and accrued income 79 135
Balance as at 31 March 101 150
Total balance as at 31 March 1,303 1,228

Included within the total is interest receivable on NLF loans of £7.561m (2018-19: £7.965m) that will be paid to the Scottish Consolidated Fund as income not applied once the debt has been settled.

Receivables are shown net of impairments as follows:

Amounts falling due within one year:
2019-20
£m
2018-19
Restated
£m
At 1 April 23 18
Charge for the year 12 15
Unused amount released (9) (4)
Utilised during the year - (6)
At 31 March 26 23
Amounts falling due after more than one year:
2019-20
£m
2018-19
Restated
£m
At 1 April 4 -
Charge for the year 5 4
Unused amount released - -
Utilised during the year - -
At 31 March 9 4

The prior year receivable figures have been restated to ensure that the long term receivable, held by the Social Security Agency, and the allocated impairment, has been correctly disclosed in line with the Agency accounts.

14. Payables and Other Liabilities

Amounts falling due within one year:
Payables and other current liabilities 2019-20
£m
2018-19
£m
Trade payables 703 504
Other taxation and social security 155 146
Superannuation payable 133 102
Other payables 353 337
Deferred income and accruals 1,621 1,754
Accrued interest due on NLF loans 8 8
Finance leases 1 1
PFI imputed finance leases 100 91
PFI deferred residual interest - -
Corporate balance with the SCF 888 979
Balances payable to the SCF 27 24
3,989 3,946
Other financial liabilities
Current instalments on NLF loans 33 27
Bank overdraft 1 -
Financial guarantees - -
Derivative financial instruments - -
Other financial liabilities 1 1
35 28
Total current liabilities 4,024 3,974

The balance payable to the SCF includes amounts due on income not applied of £3.0m (2018-19: £0.8m).

Amounts falling due after more than one year:
Payables and other non-current liabilities 2019-20
£m
2018-19
£m
Other payables 8 106
Deferred income and accruals 8 9
Finance leases 22 22
PFI imputed finance leases 2,959 3,024
2,997 3,161
Other financial liabilities
Instalments due on NLF loans 531 564
Financial guarantees - -
Derivative financial instruments - -
Other financial liabilities 50 -
581 564
Total non-current payables and other financial liabilities 3,578 3,725

15. Provisions for liabilities and charges

Student
Loans Sale
Subsidy
£m
Early
Departure
Costs
£m
NHS Clinical
and Medical
Negligence
£m
SPS
Prisoner
Compensation
£m
Business
Support
Measures
£m
Other
Provisions
£m
Total
2019-20
£m
Total
2018-19
£m
Balance as at 1 April 37 133 633 - - 77 880 845
Add: element reported as due within one year 2 12 148 1 - 57 220 179
Balance as at 1 April 39 145 781 1 - 134 1,100 1,024
Provided for in year - 20 30 1 912 31 994 251
Provisions not required written back (1) (3) - - - (25) (29) (109)
Provisions utilised in year (3) (14) (5) (1) - (7) (30) (62)
Discount amortised 1 6 - - - - 7 (4)
Balance as at 31 March 36 154 806 1 912 133 2,042 1,100
Payable within one year (3) (12) (188) (1) (912) (49) (1,165) (220)
Balance as at 31 March 33 142 618 - - 84 877 880

Analysis of expected timing of any resulting outflows of economic benefits

Student
Loans Sale
Subsidy
£m
Early
Departure
Costs
£m
NHS Clinical
and Medical
Negligence
£m
SPS
Prisoner
Compensation
£m
Business
Support
Measures
£m
Other
Provisions
£m
Total
2019-20
£m
Total
2018-19
£m
Payable in 1 year 3 12 188 1 912 49 1,165 220
Payable between 2 - 5 yrs 16 39 472 - - 71 598 536
Payable between 6-10 yrs 17 37 40 - - 12 106 142
Thereafter - 66 106 - - 1 173 202
Total as at 31 March 36 154 806 1 912 133 2,042 1,100

15. Provisions for liabilities and charges (continued)

Student loans

The debt sale subsidy is the additional cost to the Scottish Government of government subsidies contractually due to the purchaser of the debts beyond the costs that the government would have incurred had the debts remained in the public sector. The debt sale subsidy provision is estimated to meet the cost of this subsidy over the expected life of loans sold. The utilisation of this provision is dependent on the timing of the repayment of the loans which is uncertain.

Early Departure Provisions

This provision is based on an estimate of exposure to potential payments in respect of employees leaving service prior to reaching normal retirement age. For the NHS, Boards meet the additional costs of benefits in respect of employees retiring early by paying the required amounts annually to the NHS Superannuation Scheme for Scotland over the period between early departure and the normal retirement date. Amounts are provided for in full when the early retirement Programme becomes binding by establishing a provision for the estimated payments, as discounted by the applicable Treasury discount rate.

NHS Clinical and Medical Negligence

Included within provisions is an amount of £806m (2018-19: £781m) which relates to clinical and medical negligence costs. Following the accounting review undertaken in 2014-15, on consolidation, the Scottish Government’s CNORIS provision represents the national liability and the Boards’ accounting for individual claims is removed.

In 2019-20 £29m (2018-19: £200m) of estimated settlement value of medical and clinical negligence claims were added to the provision.

In 2019-20 £5m (2018-19: £40m) in claims were settled and £nil (2018-19: £92m) was written back as no longer required.

Prisoner Compensation

This provision is based on an estimate of exposure to potential prisoner compensation claims; further information can be found within the Scottish Prison Service annual accounts, found within

https://www.sps.gov.uk/Corporate/Publications/Publications.aspx

Business Support Measures

A constructive obligation was deemed to be established in respect of support grants to be paid to eligible businesses to ameliorate the adverse economic consequences of the COVID-19 pandemic. In order to put the necessary administrative structures in place, Scottish Ministers announced plans for the support in March 2020 with schemes, administered by Local Authorities, scheduled to commence from 1 April 2020. On 30 March, the Scottish Government issued guidance to Local Authorities on the eligibility for support, to support the consideration by Local Authorities of applications from businesses. The provision recognised at 31 March 2020 is in respect of this first phase of support and is based on information provided by Local Authorities of their spend to October 2020; the grant schemes closed to new applications on 10 July and so, while the actual spend on these schemes is subject to formal confirmation, it is not expected to be significantly different.

Other Provisions - NHS Balances

Other provisions include NHS balances of £17m (2018-19: £12m). The NHS balances relate to various Health Boards and Bodies and include: provision for non-medical legal liabilities, employer and third party costs, provision for future development costs, dilapidations, and a variety of other smaller provisions.

Other Provisions - Transport Scotland Balances

A land & property acquisition provision of £41m (2018-19: £62m) relates primarily to estimates made of the likely compensation payable in respect of planning blight, discretionary and compulsory acquisition of property from owners arising from physical construction of a road or rail scheme. When land is acquired by CPO it is not known when compensation settlements will be made. A provision for the estimated total cost of land acquired is created when it is expected that a general vesting declaration will be published in the near future. It may take several years from the announcement of a scheme to completion and final settlement of all liabilities. The estimates provided by the Valuation Office Agency are reviewed bi-annually.

Also included in other provisions is £5.5m (2018-19: £5.5m) relating to other retirement benefit costs. Transport Scotland agreed to meet the additional cost of benefits payable to specific employees who retired early until they reach the age of 60 at which point the liability is assumed by the PCSPS. The cost of these benefits is provided in full when the employee retires.

Other Provisions - Scottish Prison Service Balances

Included within other provisions are Scottish Prison Service balances of £12m (2018-19:£10m) relating to Injury Benefits. The Injury Benefits provision include estimates of amounts payable to former employees for loss of earnings under the Civil Service Injury Benefit Scheme.

Other Provisions - Crown Office and Procurator Fiscasl Service Balance

Included within other Provisions are Crown Office balances of £12m (2019-20: £nil) relating to a specific litigation claim.

Other Provisions - European funded schemes

European Structural Funds Programmes - In 2016-17 a provision of £1m was made in recognition of the anticipated cost of self corrections relating to closed schemes (2007-13). This provision has been reviewed and remains at £1m in anticipation of exchange rate fluctuations between the euro and sterling.

CAP schemes - provisions have been made in anticipation of exchange rate fluctuations between sterling and the euro (£0.3m; 2018-19: £1m).

Other Provisions - Lochaber Aluminium Smelter

In December 2016, the Scottish Government entered into a 25-year guarantee relating to the hydro plant and aluminium smelter at Lochaber. This involved the Government guaranteeing the power purchase obligations of the smelter if the business does not fulfil its obligations to pay for contracted power. The Government's potential exposure to default payments and review of a provision valuation in line with new accounting standards in 2018-19 resulted in a new provision of £33million. This has been reviewed and revalued at £37million as at 31 March 2020.

16. Capital Commitments

Property, plant and equipment 2019-20
£m
2018-19
£m
Contracted capital commitments for which no provision has been made 4,501 3,536
Total 4,501 3,536
Intangible assets
Contracted capital commitments for which no provision has been made 14 16
Total 14 16
Total Commitments 4,515 3,552

2019-20 property, plant and equipment commitments include future payments of £4,329m (2018-19: £3,456m) in respect of major road schemes currently under construction, a number of capital projects being undertaken by NHS Boards of £169m (2018-19: £74m).

2019-20 intangible asset commitments include the development of a replacement IT system for Marine Scotland's vessels of £1m (2018-19: £3m) (90% reimbursement expected from the European Union), a £2m Digital Planning commitment (2018-19: £1m), £3m (2018-19: £5m) to complete the CAP Futures project and £6m (2018-19: £2m) for the development of Social Security Digital Portals, SPPA enhancement of the existing pension administration and payroll system £nil (2018-19: £3m) and Disclosure Scotland Transformation Programme of £1m (2018-19: £2m).

17. Commitments under Leases

17a. Operating Leases

Total future minimum lease payments under operating leases are given in the tables below for each of the following periods:

Obligations under operating leases comprise:
Land 2019-20
£m
2018-19
£m
Within one year 8 8
Between two and five years (inclusive) 25 28
After five years 22 25
Total 55 61
Buildings
Within one year 38 39
Between two and five years (inclusive) 114 113
After five years 133 143
Total 285 295
Other Commitments
Within one year 21 21
Between two and five years (inclusive) 27 30
After five years 11 12
Total 59 63

17b. Finance Leases

Total future minimum lease payments under finance leases are given in the tables below for each of the following periods:

Obligations under finance leases comprise:
Buildings 2019-20
£m
2018-19
£m
Within one year 5 5
Between two and five years (inclusive) 20 20
After five years 52 56
Total 77 81
Less the interest element (54) (58)
Total 23 23
Other Commitments
Within one year - -
Between two and five years (inclusive) 1 1
After five years - -
Total 1 1
Less the interest element - -
Total 1 1

This total net obligation under finance leases is analysed in Note 12.

17c. Commitments Under Leases

Within the Scottish Government core estate, the main leasing arrangements are entered into on the basis of Market Rent, often incorporating an initial rent-free period. Subsequent rent reviews are calculated on the basis of (i) the market rental value or (ii) the passing rental if the Market Rent is less than the passing rental at the time of the rent review (i.e. upwards only). The Scottish Government have some properties where the rent at review is calculated by reference to the Retail Prices Index or some other index (often also upwards only).

The ground lease covering the land at Saughton House and the Logie Weir Fish Counter are the only properties which have terms of renewal. All other leases have no terms of renewal or purchase options.

18. Other Financial Commitments

18a. Other Commitments

The payments to which the Scottish Government is committed analysed by the period during which the commitment expires are as follows:
2019-20
£m
2018-19
£m
Payable in 1 year 1,629 991
Payable between 2 - 5 years 1,483 4,520
Payable in more than 5 years 2,627 -
Total 5,739 5,511

Other financial commitments payable within one year include £750m (2018-19: £563m) as a committed income stream to Network Rail in accordance with the Deed of Grant, £799m (2018-19: £394m) to Abellio ScotRail; £38m (2018-19: £20m) to Serco Caledonian Sleeper under the Franchise Agreements; £36m for the Forestry Grant Scheme (2018-19: £nil); £3m for Rural Priorities (2018:19: £nil); Other financial commitments payable within one year include £1m (2018-19: £nil) in relation to hosting the UCI World Cycling Championships; £1m (2018-19: £nil) regarding Social Security DWP Recharges and £2m (2018-19: £3m) to fund the CAP Payments IT system.

Commitments payable within 2 to 5 years include £762m (2018-19: £2,787m) to Network Rail, £619m (2018-19: £1,682m) to Abellio; £29m (2018-19: £76m) to Serco; £27m (2018-19: £30m) to host the 2023 UCI World Cycling Championships; £37m for the Forestry Grant Scheme (2018-19: £nil); and £10m for Rural Priorities (2018:19: £nil)

Commitments payable after 5 years include £1,275m (2018-19: £nil) to Network Rail, £1,290m (2018-19: £nil) to Abellio; £57m (2018-19: £nil) to Serco; and £5m to Rural Priorities - SDRP 2007-2013 (2018-19: £nil)

For further details on the Forestry Grant and the Rural Priorities commitments, which arose from the Scottish Rural Development Plans, see the Scottish Forestry annual report and accounts.

18b. Guarantees, Indemnities and Letters of Comfort

The Scottish Government entered into the following guarantees, indemnities or provided letters of comfort. None of these is a contingent liability within the meaning of IAS 37, Provisions, Contingent Liabilities and Contingent Assets, since the likelihood of a transfer of economic benefit in settlement is too remote. They are included for parliamentary reporting and accountability purposes.

Only guarantees and indemnities above the threshold of £1m, which have to be reported and authorised by the Scottish Parliament in accordance with the written agreement between the Finance Committee and the Scottish Government, are included in the consolidated annual accounts.

Guarantees

The Scottish Government has underwritten the Abellio ScotRail and Serco Caledonian Sleeper pension funds, in line with guarantees provided to other train operators by the Department for Transport.

There are Section 54 guarantees issued as part of the rail rolling stock procurement process.

18b. Guarantees, Indemnities and Letters of Comfort (continued)

Pension fund guarantees

Guarantees for 10 local government pension schemes, as a result of Visit Scotland taking on the staff from the local area tourist boards.

Guarantee to Lothian Pension Fund in relation to the admission of Scottish Futures Trust Ltd, Scottish Homes and The Scottish Agricultural College, the Scottish Agricultural College to the Local Government Pension Fund and the Scottish Legal Complaints Commission.

Guarantee to Lothian Pension Fund in relation to the admission of Youthlink and Scotland’s Learning Partnership.

Guarantee to Fife Council in relation to the admission of The Scottish Agricultural College to the LG Pension Fund.

Guarantee to Dumfries and Galloway Council in relation to the admission of The Scottish Agricultural College to the LG Pension Fund.

Guarantee to Strathclyde Pension Fund in relation to Highlands and Islands Enterprise.

Guarantee to Strathclyde Pension Fund in relation to admission of Scottish Canals.

Guarantee to Shetland Council, Orkney Islands Council and Highland Council Pension Fund Schemes.

Indemnities

At the beginning of the year there was an existing indemnity relating to objects lent under the National Heritage Act 1980 and the National Heritage (Scotland) Act 1985. The year-end balance depends on new acquisitions and the number of exhibitions that these pieces are included in during the financial year, and at 31 March this was £1,277m (2018-19: £967m).

Existing indemnity for local museums and galleries dependent on the number of new acquisitions and number of exhibitions that these pieces were included in during the financial year, valued at £17m (2018-19: £22m) at 31 March.

A specific indemnity of £8m has been agreed with the Australian Museum Trust with regard to the Tyrannosaurus Exhibition hosted by the National Museum of Scotland, which opened in January 2020.

Existing indemnity related to operating agreements in respect of the ScotRail and Caledonian Sleeper Franchise Agreements.

Indemnity clause in roads contracts to compensate Network Rail for any damage or loss of access.

Liability agreement for any issues caused by the Glasgow Airport Rail Link ground investigation work for the next 2 years.

Letters of Comfort

None

19. Commitments under Service Concession Arrangements

Non-Profit Distributing (NPD), Public Private Partnerships (PPP) and Private Finance Initiative (PFI) transactions are accounted for in accordance with IFRIC 12, Service Concession Arrangements which sets out how NPD/PPP/PFI transactions are to be accounted for in the private sector.

A transaction is deemed to be ‘on balance sheet’ (i.e. included in Statement of Financial Position) when:

  • the grantor controls or regulates what services the operator must provide with the infrastructure, to whom it must provide them and at what price; and
  • the grantor controls – through ownership, beneficial entitlement or otherwise – any significant residual interest in the infrastructure at the end of the term of the agreement.

Where the transaction is deemed to be ‘on balance sheet’, the substance of that contract is that the Scottish Government has a finance lease, with the asset being recognised as a fixed asset in the Scottish Government’s Statement of Financial Position.

19a. Commitments Under Service Concession Arrangements - Included in Statement of Financial Position

Description of Schemes

Further details of the individual contracts, including estimated capital value, can be found in the individual accounts of the NHS bodies in Scotland, Scottish Prison Service and Transport Scotland.

Health Bodies

NHS Ayrshire

Ayrshire and Arran Woodland View (formerly North Ayrshire Community Hospital) - sharing a site in Irvine with the Ayrshire Central Hospital. The building is a NPD model and reached practical completion and handover on the 1st April 2016. The building provides a Mental Health and Frail Elderly inpatient facility for Ayrshire. The 25 year contract period commenced on the 1st April 2016 and will be completed on the 31st March 2041. At the end of the contract period the building will revert to NHS ownership.

Ayrshire and Arran East Ayrshire Community Hospital - situated in Cumnock, the facility provides Inpatient beds, Elderly Mental Ill, and GP Acute; there are day facilities for Frail Elderly and Elderly Mental Ill and Outpatient Clinics (including Allied Health Professions). 4 years prior to the end of the 25 year contract period, negotiations will have been undertaken to determine future options available for the site.

Ayrshire and Arran Ayrshire Maternity Unit - adjoined to University Crosshouse Hospital in Kilmarnock, the facility provides Area Midwifery services for in-patients, day patients, and out-patients. The 30 year contract commenced in July 2006 and will be completed in July 2036. At the end of this period, the building is available for transfer to the NHS at no additional cost.

NHS Dumfries & Galloway

The Board has one contract financed under a Public Finance Initiative (PFI) and one under the Non Profit Distributing (NPD).

Dumfries and Galloway Maternity and Day Surgery Unit - situated in Dumfries, is included in the statement of financial position at a valuation of £5m as at 31 March 2020 (at 31 March 2019: £5m). The premises opened in January 2002 and the contract ends in January 2032, however following the successful migration of these services to the new Dumfries and Galloway Royal Infirmary, the future planning arrangements for this building are now underway. This building is now referred to as Mountainhall.

Dumfries and Galloway District General Hospital – The Board opened the doors to its new District General Hospital in December 2017 following the successful completion of the project funded under NPD. The land and buildings are included in the statement of financial position at a valuation of £209m as at 31 March 2020 (at 31 March 2019: £208m) and the contract ends in September 2042.

NHS Fife

NHS Fife hold 2 FPI contracts, which are both held as non-current assets of NHS Fife Board and the liabilities to pay for the properties are accounted for as finance lease obligations.

Fife St Andrews Community Hospital and Health Centre - The contract started on 31st July 2009 and lasts 30 years, ending on 30th July 2039.

Fife Victoria Hospital - The contract started on 28th October 2011 and lasts 30 years, ending on 27th October 2041.

NHS Forth Valley

Clackmannanshire Community Healthcare Centre (CCHC)CCHC is a service concession for the development and right of use of Community Health Facilities and provision of services, including maintenance of the facility, under a Project Agreement. Services Commencement date was 18th May 2009 and the contract term ends in July 2037. At the end of the agreement the asset will revert to the ownership of the Board.

Forth Valley Royal Hospital (FVRH) - FVRH is a service concession for the NHS Forth Valley development and right of use of a new Acute Hospital for Forth Valley (FVRH) and associated provision of services including facilities management services such as patient catering, portering, cleaning and maintenance. Services Commencement (handover of the facility to the Board) was in three phases May 2010, August 2010 and April 2011. The duration of the agreement is for 30 years from practical completion to the end of the financial year in which the 30th anniversary occurs. At the end of the agreement the asset will revert to the ownership of the Board.

Stirling Health and Care Village (SCV)- Service concession for the development and right of use of Community Health and Care facilities which brings together on one site a range of health, local authority and other partner organisation's services. The facility was handed over in three phases at the end of June 2018, October 2018 and October 2019. The facility will be delivered under the Hub initiative and the contract agreement is for 25 years ending in October 2044.

19a. Commitments Under Service Concession Arrangements - Included in Statement of Financial Position (Cont.)

NHS Grampian

Aberdeen Health and Community Care Village - Service Concession agreement with HUB North of Scotland Ltd for occupancy of the Aberdeen Health and Community Care Village effective 14th November 2013. Under the terms of the agreement NHS Grampian have a legal commitment to occupy the buildings for a period of 25 years and will incur annual charges for occupancy, maintenance and running costs.

Forres Health Centre - Service Concession agreement with HUB North of Scotland Ltd for occupancy of Forres Health Centre effective 9 August 2014. Under the terms of the agreement NHS Grampian have a legal commitment to occupy the buildings for a period of 25 years and will incur annual charges for occupancy, maintenance and running costs.

Woodside Health Centre - Service Concession agreement with HUB North of Scotland Ltd for occupancy of Woodside Health Centre effective 28 June 2014. Under the terms of the agreement NHS Grampian have a legal commitment to occupy the buildings for a period of 25 years and will incur annual charges for occupancy, maintenance and running costs.

Inverurie Centres - Service Concession agreements with HUB North of Scotland Ltd for occupancy of the Inverurie Health and Community Care Hub effective 23 July 2018, Fosterhill Health Centre effective 8 May 2018 and the Inverurie Health and Community Care Hub effective 23 July 2018. Under the terms of the agreement NHS Grampian have a legal commitment to occupy the buildings for a period of 25 years and will incur annual charges for occupancy, maintenance and running costs.

NHS Greater Glasgow

Larkfield Unit – The Day Hospital Elderly Care Facility contract commenced with Quayle Munro Ltd on 1 November 2000 for a period of 25 years. The estimated capital value at commencement of the contract was £9m.

Southern General Hospital – The Elderly Bed Facility contract commenced with Carillion Private Finance on 1 April 2001 for a period of 28 years. The estimated capital value at commencement of the contract was £11m.

Gartnavel Royal Hospital – The Mental Health Facility contract commenced with Robertson Capital Projects Ltd on 1 October 2007 for a period of 30 years. The estimated capital value at commencement of the contract was £18m.

Stobhill Rowanbank Clinic – The Mental Health Secure Care Centre contract commenced with Quayle Munro Ltd on 1 May 2007 for a period of 35 years. The estimated capital value at commencement of the contract was £19m.

Stobhill Hospital – The Ambulatory Care and Diagnostic Treatment Centre contract commenced with Glasgow Healthcare Facilities Ltd on 1 April 2009 for a period of 30 years. The estimated capital value at commencement of the contract was £79m.

Stobhill Hospital – The Ambulatory Care and Diagnostic Treatment Centre 60 bed extension. PFI contract commenced with Glasgow Healthcare Facilities Ltd on 25 February 2011 for a period of 30 years. Estimated capital value at commencement was £16m.

Victoria Hospital – The Ambulatory Care and Diagnostic Treatment Centre contract commenced with Glasgow Healthcare Facilities Ltd on 1 April 2009 for a period of 30 years. The estimated capital value at commencement of the contract was £99m.

Gorbals Health and Care Centre - HUB contract commenced with HUB West Scotland Project Co. on 6 November 2018 for a period of 25 years. Estimated capital value at commencement £14m.

Eastwood Health and Care Centre - HUB contract commenced with HUB West Scotland Project Co. on 3 June 2016 for a period of 25 years. Estimated capital value at commencement was £9m.

Maryhill Health and Care Centre - HUB contract commenced with HUB West Scotland Project Co. on 15 July 2016 for a period of 25 years. Estimated capital value at commencement was £12m.

Inverclyde Orchardview - HUB contract commenced with HUB West Scotland Project Co. on 17 July 2017 for a period of 25 years. Estimated capital value at commencement was £8m.

Woodside Health and Care Centre - HUB contract commenced with HUB West Scotland Project Co. on 15 May 2019 for a period of 25 years. Estimated capital value at commencement £18m.

NHS Highland

New Craigs - The scheme is a replacement for the Craig Dunain Hospital, Inverness and provides inpatient facilities for adults with mental health needs or learning disabilities. The contract commenced July 2000 for a period of 25 years. The estimated capital value at commencement of the contract was £14m.

Easter Ross - This scheme is a redevelopment of County Hospital, Invergordon into a Primary Care Centre and combines a community hospital and a health centre, integrating primary and community care into one community health resource. The contract commenced February 2005 for a period of 25 years. The estimated capital value at the commencement of the contract was £9m and the PFI property will revert to the board at the end of the contract.

Mid Argyll Community Hospital and Integrated Care Centre Lochgilphead NHS Highland financed the development of the Mid Argyll Community Hospital and Integrated Care Centre in Lochgilphead. The contract commenced June 2006 and will be completed May 2036 at which point the ownership of the asset will transfer to the board. The estimated capital value at the commencement of the contract was £19m.

Tain Health Centre - Service Concession agreement with HUB North of Scotland Ltd for occupancy of the Tain Health Centre effective 24th May 2014. Under the terms of the agreement NHS Highland have a legal commitment to occupy the buildings for a period of 25 years and will incur annual charges for occupancy, maintenance and running costs.

19a. Commitments Under Service Concession Arrangements - Included in Statement of Financial Position (Cont.)

NHS Lanarkshire

Hairmyres Hospital - The provision of a large general hospital. The period of contract is 26 March 2001 to 30 June 2031. The estimated capital value is £73m. The hospital services are provided under a contract between Lanarkshire Health Board and Prospect Healthcare (Hairmyres) Limited, with hard and soft facilities management services being supplied under a subcontract to ISS Mediclean Limited.

Wishaw Hospital - The provision of a large general hospital. The period of contract is 28 May 2001 to 30 November 2028. The estimated capital value is £151m. The hospital and services are provided under a contract between Lanarkshire Health Board and Summit Healthcare (Wishaw) Limited, with hard and soft facilities management services being supplied under a subcontract to SERCO health Limited.

Stonehouse Hospital - The provision of a small community hospital. The period of contract is 1 May 2004 to 30 April 2034. The estimated capital value is £4m (2018-19: £4m). The hospital is provided under a contract between Lanarkshire Health Board and Stonehouse Hospitals Limited, with the service arrangements provided internally by Lanarkshire Health Board.

Lanarkshire Hub Projects - The provision of three community Health Centres in East Kilbride, Kilsyth and Wishaw under the Scottish Future Trust Hubco leased model. These new facilities opened in 2015-16 and are provided by HUB South West Scotland under a 25 year contract. The Hubco provides the centres and is responsible for lifecycle and hard facilities management services which are delivered under a subcontract with Graham Facilities Management ltd. The current estimated capital value of these facilities is £45m (2018-19: £45m).

NHS Lothian

Royal Infirmary of Edinburgh - An Acute Teaching hospital. The contract started 1 November 2001 and will end 30 June 2053.

Ellens Glen - Service provides a 60 bedded facility for frail elderly and dementia patients. The contract started 1 November 1999 and will end 1 November 2029.

Findlay House - Service provides a 60 bedded facility for frail elderly and dementia patients in the grounds of the Eastern General Hospital. The contract started 13 June 2003 and will end 12 June 2033.

Tippethill - Service provides a 60 bedded facility for frail elderly and dementia patients at Whitburn. The contract started 6 September 2000 and will end 5 September 2025.

Bathgate Primary Care Centre - Service provides a Primary Care Centre which accommodates 3 GP Practices and the CHP's community activities in the locality. The contract started 1 October 2001 and will end 30 September 2026.

Midlothian Community Hospital - This hospital provides 88 beds for frail elderly and dementia patients, outpatient clinics and a number of CHP led community activities. The contract started 1 September 2010 and will end 31 August 2040.

Allermuir Health Centre - An integrated primary care facility, combining General Practice and NHS community health services in the Firhill area of Edinburgh. The contract started on 25 September 2017 and will end on 24 September 2042.

Blackburn Partnership Centre - This facility includes health and social care services as well as community services for local residents. The contract started on 22 September 2017 and will end on 21 September 2042.

Pennywell All Care Centre - A joint development between NHS Lothian and the City of Edinburgh Council, providing health and social care services for the local community. The contract started on 23 October 2017 and will end on 22 October 2042.

Royal East Lothian Community Hospital phases 1 and 2 - The project brings together services previously provided in Roodlands and Herdmanflat Hospitals and also supports patients previously in Haddington and Crookston Care Homes and Midlothain Community Hospital. The contract started on 10 February 2017 (Phase 1) and 23 February 2018 (Phase 2) and will end on 30 August 2044.

Royal Hospital for Children and Young People Edinburgh & Department for Clinical Neurosciences - This a new hospital for children and young people, integrating the department of clinical neurosciences into the same new build.

19a. Commitments Under Service Concession Arrangements - Included in Statement of Financial Position (Cont.)

NHS Orkney

Balfour Hospital -The facility is a general hospital and healthcare facility in Kirkwall, Orkney, comprising 48 beds and bringing together primary care, emergency and elective diagnostic, outpatient, day case and inpatient services. This is a Non Profit Distribution (NPD) scheme with a funding variant over 25 years.

NHS Tayside

The Carseview Centre - Located on the Ninewells Hospital site in Dundee the centre provides in-patient facilities for Adult Psychiatry and Learning Disability. The contract commenced 11 June 2001 and will be completed 11 June 2026, when NHS Tayside may negotiate a further contract or purchase the facility.

The Susan Carnegie Clinic - The Mental Health NPDO Phase 1 is located on the Stracathro Hospital site in Brechin and provides in-patient facilities and a day hospital for Psychiatry of Old Age. The contract start date was 2 December 2011 and the end date will be 17 May 2042, when NHS Tayside will become owners of the facility.

Murray Royal Hospital - Mental Health facilities - The Mental Health NPDO Phase 2 is located on the Murray Royal Hospital site in Perth and provides in-patient, day-patient and out-patient facilities for NHS Tayside's General Adult Psychiatry, Psychiatry of Old Age and Low Secure Forensic services, as well as a regional in-patient unit providing Medium Secure Forensic services for patients from the North of Scotland Health Boards. The contract start date was 1 June 2012 and the end date will be 17 May 2042, when NHS Tayside will become owners of the property.

Whitehills Community Resource Centre - Covers Forfar, Kirriemuir and the surrounding area in conjunction with Angus Council and Lippen Care. The contract commenced 21 March 2005 and will be completed 21 March 2030, when NHS Tayside will become owners of the facility.

NHS Scotland Pharmaceuticals 'Specials' Service (NHSSPSS) - Facility is located on the Ninewells Hospital site, Dundee, and is an NHS manufacturing facility for the supply of unlicensed medicines. The contract start date was 15 March 2019, and the end date will be 14 December 2043, when NHS Tayside will become owners of the facility.

National Services Scotland

Jack Copland Centre - The National Centre for the processing and testing of blood, tissues and cells for patients in Scotland by the Scottish National Blood Transfusion Service (SNBTS).

Transport Scotland

M6/(74) DBFO - The contract covers the design, construction, financing and operation of 28.3km of the new Scottish motorway as well as the operation and maintenance of 90km of new and existing Scottish motorway. Payments are made under a shadow toll regime. The toll period commenced in July 1997 and expires in July 2027.

M77 Fenwick to Malletsheugh - This is a joint PPP entered into by the Scottish Government, East Renfrewshire and South Lanarkshire Councils. The project covers the design, construction, financing and operation of 15km of the new Scottish motorway and a new 9km local link road between the new motorway and the A726 trunk road. Payments are made under a shadow toll regime. The toll period began in April 2005 and expires in April 2035.

M80 - The contract covers the design, build and financing of approximately 18km of dual two/three lane motorway, together with, but not limited to, associated slip roads, side roads, junctions, structures, culverts and associated works. The contract also incorporates the operation and maintenance of the new motorways, associated structures, and related elements for a period of 30 years after completion of the new works. Unitary charge payments commenced in September 2011 and will cease in September 2041.

M8, M73, M74 Improvements - The project upgrades the A8 Baillieston to Newhouse, completing the M8 Glasgow to Edinburgh, and includes improvements to the M74 Raith Interchange and the widening of key sections of the M8, M73 & M74. NPD contract also incorporates management, operation and maintenance for 30 years. Unitary charge payments became committed as sections of the road became available in 2017 and will cease on 15 March 2047.

Aberdeen Western Peripheral Road/Balmedie and Tipperty - The project involves the construction of a new dual carriageway around the City of Aberdeen and upgrades the road between Balmedie and Tipperty to dual carriageway. The NPD contract also incorporates the management, operation and maintenance of these roads for the next 30 years. The unitary charge payments become committed in phases from Autumn 2016 and will cease in 2048. The final phase of the project opened to traffic in February 2019.

19a. Commitments Under Service Concession Arrangements - Included in Statement of Financial Position (Cont.)

Scottish Prison Service

HMP Kilmarnock - The contract covers the design, construction, financing and operation of a prison HMP Kilmarnock. The contract commenced March 1999 for a period of 25 years. The capital liability is now nil, however, payments for the service element continue to the end of the contract.

HMP Addiewell - The contract covers the design, construction, financing and operation of HMP Addiewell. The contract commenced December 2008 for a period of 25 years.

Court Custody and Prisoner Escort Service - This service concession arrangement covers a service let for 8 years with an option to extend for a further 2 years. The contract commenced in January 2019.

19b. Commitments Under Service Concession Arrangements - Included in Statement of Financial Position

Under IFRIC 12 the asset is treated as an asset of the Scottish Government and included in the Scottish Government's accounts as a non current asset. The liability to pay for the property is in substance a finance lease obligation. Contractual payments therefore comprise two elements: imputed finance lease charges and service charges. The imputed finance lease obligation is as follows:

Gross Minimum Lease Payments NHS Bodies in Scotland
£m
Scottish Prison Service
£m
Transport Scotland
£m
2019-20 Total
£m
2018-19 Total
£m
Rentals due within 1 year 179 64 62 305 302
Due within 2 to 5 years 712 251 248 1,211 1,203
Due after 5 years 2,276 438 1,153 3,867 4,574
Total 3,167 753 1,463 5,383 6,079
Interest Element NHS Bodies in Scotland
£m
Scottish Prison Service
£m
Transport Scotland
£m
2019-20 Total
£m
2018-19 Total
£m
Rentals due within 1 year 126 6 26 158 178
Due within 2 to 5 years 474 22 91 587 653
Due after 5 years 1,035 24 162 1,221 1,467
Total 1,635 52 279 1,966 2,298
Present Value of Minimum Lease Payments NHS Bodies in Scotland
£m
Scottish Prison Service
£m
Transport Scotland
£m
2019-20 Total
£m
2018-19 Total
£m
Rentals due within 1 year 53 58 36 147 124
Due within 2 to 5 years 238 229 157 624 550
Due after 5 years 1,241 414 991 2,646 3,107
Total 1,532 701 1,184 3,417 3,781
Service elements due in future periods, included above NHS Bodies in Scotland
£m
Scottish Prison Service
£m
Transport Scotland
£m
2019-20 Total
£m
2018-19 Total
£m
Rentals due within 1 year 67 53 41 161 167
Due within 2 to 5 years 293 209 90 592 639
Due after 5 years 1,345 353 264 1,962 2,217
Total 1,705 615 395 2,715 3,023

19c. Contingent rents

IAS 17 Leases defines contingent rents as “that portion of lease payment that is not fixed in amount but is based on the future amount of a factor that changes other than with the passage of time (e.g. percentage of future sales, amount of future use, future price indices, and future market rates of interest)". Contingent rents recognised as an expense in the period were £21m (2018-19: £29m).

20. Contingent Assets/Liabilities disclosed under IAS 37

20a. Contingent Assets disclosed under IAS 37: Provisions, Contingent Liabilities and Contingent Assets

The definition of a contingent Asset under IAS 37: Provisions, Contingent Liabilities and Contingent Assets is a possible asset, whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the entity's control.

NHS Employer's Liability estimated at £2m (2018-19: £2m).

Grants repayable as a result of sales of Housing Association Properties to tenants or as a result of conditions of grant being breached. Grants become repayable when conditions of grant cease to be met. It is not possible to predict the level of activity in future years.

Repayments of grant from the Open Market Shared Equity Scheme which allows people on low income to buy a share in a property, the balance being owned by a housing association and funded by grant from the Scottish Government. If the property is sold or an increased share is purchased by the owner, the grant becomes repayable. It is not possible to estimate the level of future receipts.

Grants repayable from Edinburgh Council Rent Guarantee - Project Resonance. Grant becomes repayable if either (a) projects do not proceed as planned, where it is repayable immediately, or, (b) projects are sold on privately up to 10 years from now. Timing is uncertain as to when events giving rise to the contingent asset are likely to occur.

There is an expectation of a secured creditor distribution to Scottish Ministers from Ferguson Marine Engineering Limited Administration. The amount due to the Scottish Government is yet to be confirmed.

20b. Contingent Liabilities disclosed under IAS 37: Provisions, Contingent Liabilities and Contingent Assets

The definition of a contingent Liability under IAS 37: Provisions, Contingent Liabilities and Contingent Assets is:

  • a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence of one or more uncertain future events not wholly within the entity's control; or
  • a possible obligation that arises from past events but is not recognised because it is not probable that a transfer of economic benefits will be required to settle the obligation; or
  • the amount of the obligation cannot be measured with sufficient reliability.

Only contingent liabilities above the threshold of £1m, which have to be reported and authorised by the Scottish Parliament in accordance with the written agreement between the Finance Committee and the Scottish Government, are included in the consolidated annual accounts.

NHS related

Clinical and Medical compensation payments of £396m (2018-19: £517m).

NHS Employer's Liability estimated at £3m (2018-19: £4m).

Housing related

The Mortgage Indemnity New Home Scheme (MI New Home) allows credit-worthy borrowers, locked out of the market by high deposit requirements, access to 90% to 95% LTV mortgages. The scheme is supported by a SG guarantee which sits behind cash indemnities set aside by participating house builders (for each house sold under the scheme). The guarantee valued at £7m (2018-19: £7m) can only be called upon once the indemnities are exhausted and lasts for 7 years.

National Housing Trust guarantees of £4m (2018-19: £4m) which the Scottish Government are committed to giving but are not active until construction has been completed. The risk of a call on the guarantee is rising in line with the current COVID-19 crisis. We do not expect a call on the guarantee in the near future but we are monitoring each development closely through the Scottish Futures Trust to understand if tenants are continuing to pay their rent and thereby allow the loan debt to be serviced. This situation is subject to change.

As part of the Winchburgh Housing Development there is a potential liability in relation to loan repayments for the construction of Winchburgh Primary School. The housing development is due to pay the council as houses are sold. The Scottish Government have entered into an arrangement to cover final costs if the developer cannot pay which can be called upon after 31 March 2026. Current value of potential liability is £15m (2018-19: £15m).

Justice related

Claims against former independent Conveyancing and Executory Practitioners in Scotland. This is a contingent liability relating to an agreement to meet any valid claims arising from the acts or omissions of past independent conveyancing and executory practitioners, as defined by the Law Reform (Miscellaneous Provisions) Scotland Act 1990.

20b. Contingent Liabilities (continued)

Justice related (continued)

An employment tribunal case claiming that a Tribunal member received less favourable treatment contrary to the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000 because he did not receive a pension in relation to his part-time fee-paid appointment. Following a decision of the employment tribunal which stated that there was not a valid comparator, the claimant has submitted an appeal.

An appeal for a pensions claim under the Part-time Workers (Prevention of less Favourable Treatment) Regulations 2000 on whether the Appellant was entitled to a pension for his service before the date for transposition of the Part-Time Workers Directive 7 April 2000, as well as for his service after that date, despite the fact that it was lawful to discriminate against a part-time worker in that earlier period.

COPFS has been subjected to several civil and damages claims. COPFS is opposing these claims but continues to review each case individually for liabilities that may arise as the legal process progresses. The value of these claims has yet to be finalised.

Rural related

The Supreme Court found that an element of the Agricultural Holdings Act 2003 breached the European Convention of Human Rights -Art 1 P1. Remedial legislation was enacted to resolve this and a small group of tenant farmers have taken SG to Court of Session seeking compensation for breach of their rights arising from the Remedial legislation. The court has issued initial judgement but litigation is still live and more court activity is required to resolve.

EU CAP audits can result in future disallowances and a number of audits are in progress relating to CAP for scheme years 2015, 2016, 2017, 2018 and 2019. The level of late payment penalties from the EC to the UK member state and the split of penalties attributed to administrations are still to be formally concluded for CAP Pillar 1 scheme year 2015.

Sports events

In certain circumstances a payment of up to 13m Swiss Francs (£10m at 31 March 2020 exchange rates) (2018-19: £nil) would be due to the UCI (the Union Cycliste Internationale) in relation to the UCI Cycling World Championships to be hosted in Scotland in 2023.

Other

The Scottish Government’s European Structural Funds Programmes are currently both ‘in suspension’ by the European Commission (EC), with the Scottish Government working closely with the EC and Audit Authority to implement the necessary audit recommendations to exit suspension. The Scottish Government has submitted all its evidence now and is awaiting a decision by the EC as to whether the suspension will be lifted in financial year 20/21. In the event that the Scottish Government is not deemed to have implemented the audit recommendation by the EC, it has the ability to apply a penalty up to 25% of the value of the Programme (€820m). The Scottish Government consider the likelihood of a financial penalty being applied by the EC as low, with continued engagement by both parties to address the audit recommendations since the beginning of the suspension, culminating in the submission of the evidence of work applying the audit recommendations by the Scottish Government to the EC.

In order to exit suspension, the Scottish Government was required to address a number of audit recommendations, as part of which it was necessary to convert expenditure to a unit cost recovery model from the EC. It is currently estimated the unit cost model will result in an under-recovery of EC Income c. £35m against the incurred expenditure of Lead Partners over the remainder of the Programme: 20/21,21/22 and 22/23. The under-recovery of income will not apply in the event a financial penalty is negotiated with the EC.

The Scottish Government occupies a number of leased properties which have dilapidations clauses in the leases. These properties are maintained in excellent order, but there is a potential liability to reinstate the internal layout of these buildings to their original floor plans. These costs will be subject to negotiation and the monetary impact is not reliably estimable.

Education Scotland has recognised one contingent liability in their accounts. Further advice is being sought in order to assess the likelihood of any financial implications (2018-19: £nil).

As part of Transport Scotland’s normal course of business, the Forestry Commission grants the right to use a forestry track as an emergency diversion route on the A83 Rest and Be Thankful on the understanding that Transport Scotland has the liability for any incidents that may occur whilst the track is being used for this purpose. The potential obligation is estimated at £5m (£2018-19: £5m) but it is considered unlikely that any liability will occur.

Functions under the Energy Act 2016 in relation to decommissioning offshore renewable energy installations in Scottish waters transferred to Scottish Ministers on 1st April 2017. This also means that the Scottish Government is now the funder of last resort in cases where the developers/owners cannot meet their decommissioning obligations. As the size of the Scottish portfolio of offshore energy projects grow so does the cumulative value of the decommissioning obligations and contingent liability.

The value of the contingent liability to date relates to 3 constructed and operational projects: Beatrice Offshore Wind Farm (c. £100m); Hywind Energy Park (c. £20m) and Aberdeen Offshore Wind Farm (c.£20m) and 2 partially constructed projects: Moray East (c. £100m) and Kincardine (c.£20m).

21. Related Party Transactions

The Scottish Government is the sole shareholder and sponsor of Caledonian Maritime Assets Ltd, David MacBrayne Ltd, Highland and Islands Airports Ltd, Scottish Futures Trust, Prestwick Airport Holdco Ltd and Ferguson Marine (Port Glasgow) Holding Ltd; a shareholder in Scottish Health Innovations Ltd and the Student Loans Company; and sponsor of Scottish Water, a number of nonconsolidated Health Bodies, and of a number of executive, advisory and tribunal Non Departmental Public Bodies. These bodies are regarded as related parties with which the Scottish Government has had various transactions during the year. Further details of Scottish Public Bodies are available from the Scottish Government website:

https://www.gov.scot/policies/publicbodies/

The Scottish Government is also the sponsor of cross-border public authorities which are listed in The Scotland Act 1998 (Cross-Border Public Authorities) (Specification) Order 1999. These bodies are regarded as related parties with which the Scottish Government has had material transactions during the year.

In addition the Scottish Government has had a number of transactions with other government departments and other central government bodies, primarily the Scotland Office and the Office of the Advocate General, the Rural Payments Agency, the Home Office and the Department for Work and Pensions.

The Scottish Government has material transactions with local government bodies, Regional Transport Partnerships, Community Justice Authorities and Scottish Water.

Information is provided in the performance report in the beginning of these accounts of the register of interests members of the Corporate Board.

All Scottish Ministers are required, as Members of the Scottish Parliament, to register information about certain financial interests. The types of financial interest that must be registered are those that might affect any actions, speeches or votes in the Parliament. This register is available for public inspection at the office of the Standards clerks with a further copy available at the main visitor information desk at the Scottish Parliament building. There are no material transactions to report.

Accounts of the individual Executive Agencies, the Crown Office and Procurator Fiscal Service and Health Bodies contain details of related party transactions specific to those entities.

22. Third Party Assets

Assets held at Statement of Financial Position date to which monetary value can be assigned:

2018-19
£m
Gross Inflows
£m
Gross Outflows
£m
2019-20
£m
Monetary amounts such as bank balances and monies on deposit 30 50 (54) 26
Unclaimed dividends and unapplied balances 13 - (1) 12
Total Monetary Assets 43 50 (55) 38

Accountant in Bankruptcy holds funds of £28m (2018-19: £32m) on behalf of third parties. This mainly comprises realised assets that are held whilst awaiting repayment to the public purse or distribution to creditors with a value of £17m (2018-19: £20m). The balance of £11m (2018-19: £12m) relates to money consigned in respect of unclaimed dividends and unapplied balances.

The NHS Bodies hold money on behalf of patients. This totalled £9m in 2019-20 (2018-19: £9m).

The Scottish Prison Service also holds £1m on behalf of prisoners (2018-19: £1m).

Other Assets held at the Statement of Financial Position date all relate to Accountant in Bankruptcy:

Description 2018-19
Number held
2019-20
Number held
Residential property 925 782
Motor vehicles, boats and caravans 14 8
Life Policies 175 138
Shares and Investments 31 7
Miscellaneous 204 802

No third party assets have been included within the Statement of Financial Position.

23. Resource Budget

The resource budget detailed in the outturn statements is the consolidated budget for the Scottish Government.

The following table provides a reconciliation of the budgets shown in the accounts with the total budget for Scotland approved by the Scottish Parliament.

2019-20
£m
2018-19
£m
Budget (Scotland) Act 2019 42,558 40,499
Scotland's Autumn Budget Revision - Scottish Statutory Instrument 2019 No. 402 537 7
Scotland's Spring Budget Revision - Scottish Statutory Instrument 2020 No. 091 1,108 3,576
Total approved spending 44,203 44,082
Less activities not included in these accounts: National Records of Scotland (44) (36)
Office of the Scottish Charity Regulator (3) (3)
Scottish Courts and Tribunals Service (141) (128)
Scottish Fiscal Commission (2) (2)
Revenue Scotland (9) (8)
Food Standards Scotland (19) (17)
Scottish Housing Regulator (4) (5)
NHS and Teachers' Pension Schemes (5,139) (6,785)
Forestry Commission (Scotland) - (69)
Scottish Parliamentary Corporate Body (108) (105)
Audit Scotland (18) (9)
Consolidated Accounts approved estimates 38,716 36,915
Portfolio analysis Budget
Act
Approval
£m
2019-20
Capital
Budget
£m
2019-20
Operating
Budget
£m
Health and Sport 14,587 328 14,259
Communities & Local Government 11,670 233 11,437
Finance, Economy & Fair Work 729 164 565
Education and Skills 4,122 551 3,571
Justice 2,800 12 2,788
Transport, Infrastructure & Connectivity 2,961 344 2,617
Environment, Climate Change and Land Reform 476 264 212
Rural Economy 393 (53) 446
Culture, Tourism and External Affairs 286 - 286
Social Security & Older People 543 67 476
Government Business & Constitutional Relations 15 - 15
Crown Office and Procurator Fiscal Service 134 10 124
Consolidated Accounts approved estimates 38,716 1,920 36,796

24. Cash Authorisation

Cash authorisation for the Scottish Administration 2019-20
£m
2018-19
£m
Budget (Scotland) Act 2019 37,808 35,869
amended by
Scotland's Autumn Budget Revision - Scottish Statutory Instrument 2019 No. 402 535 (69)
Scotland's Spring Budget Revision - Scottish Statutory Instrument 2020 No. 091 11 261
Total Approved Cash Authorisation for the Scottish Administration 38,354 36,061
Less non core activities not included in the consolidated accounts:
National Records of Scotland (40) (33)
NHS and Teachers' Pensions (133) (475)
Office of the Scottish Charity Regulator (3) (3)
Scottish Housing Regulator (4) (4)
Scottish Courts and Tribunals Service (117) (108)
Revenue Scotland (9) (8)
Food Standards Scotland (18) (16)
Scottish Fiscal Commission (2) (2)
Available Cash Authorisation for Consolidated Bodies 38,028 35,412
Funding drawn down from the Scottish Consolidated Fund SOCTE 37,524 34,496

Contact

Email: accountancyservicesunit@gov.scot